TMI Blog2015 (2) TMI 728X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Tribunal in the quantum proceedings and that order has attained finality. The explanation given by the assessee for the claim of depreciation is neither bona fide nor substantiated. All these are on the basis of appreciation of evidence on record found by the lower authorities and thus, the impugned order is based on appreciation of evidence and has been reached on a finding of fact. No perversity or illegality in the order of the Income-tax Appellate Tribunal. - Decided against assessee. - DB ITA-104/2012, DB ITA-101/2012, DB ITA-102/2012, DB ITA-103/2012 - - - Dated:- 19-8-2014 - MR. AJAY RASTOGI AND MR. J.K. RANKA, JJ. For the Respondent : Mr. Kamlesh Kumar Meena, Assistant Commissioner JUDGEMENT J. K. Ranka J.- 1. These four Income-tax appeals are directed against the common order dated October 7, 2011, passed by the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur (for short, the ITAT ) by which the Income- tax Appellate Tribunal, while upholding the order passed by the Commissioner of Income-tax (Appeal) (for short, CIT(A) ), has dismissed the appeals filed by the appellant-assessee. It relates to the assessment years 1994-95, 1995-96, 1996- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed technical know-how for manufacturing of stitching and winding machines for the manufacture of electrolytes. The consideration for acquiring the technical know-how for manufacture of stitching and winding machines was ₹ 400 lakhs while the consideration for acquiring the technical know-how for manufacture of electrolytes amounted to ₹ 250 lakhs. Such memorandum of understanding was signed by Shri V. K. Bhargava, chairman of the appellant-assessee and Shri H. C. Chopra, president of Punsumi India Ltd. Both the persons are also directors of the appellant-assessee. The appellant-assessee capitalised the entire amount of ₹ 650 lakhs and claimed depreciation. However, a finding of fact is confirmed by the authorities that nothing was manufactured by the appellant-assessee by using the aforesaid technical know-how. The appellant-assessee again entered into another memorandum of understanding on April 20, 1993, signed by the same persons in the same capacity according to which Punsumi India Ltd. was to manufacture machinery by using the aforesaid technical know-how owned by the appellant-assessee. It was, however, agreed that Punsumi India Ltd. will pay royalty to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mall/meagre which proved that the transaction in between the two was a colourable transaction. It was also observed by the Assessing Officer in the assessment order that against the technical know-how, the charges of ₹ 650 lakhs payable by the appellant-assessee, Punsumi India Ltd. had acquired shares worth ₹ 500 lakhs of the appellant-assessee and the balance was shown outstanding. Accordingly, the Assessing Officer disallowed the depreciation in the assessment order passed on February 23, 1998. 6. The matter was carried in appeal by the assessee before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) sustained the disallowance of depreciation on the facts found and, after considering the material on record, held that the assessee, in fact, had not acquired the technical know-how and, subsequently, the technical know-how was not used by the appellant and the technical know-how, if any, was used by the transferor, i.e., Punsumi India Ltd. and it was further observed by the Commissioner of Income-tax (Appeals) that it is doubtful whether Punsumi India Ltd. itself had any technical know-how as they had not sold the technical know-how t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 271(1)(c) of the Income-tax Act it goes to show that the penalty can be imposed by the Assessing Officer or the Commissioner (Appeals) or the Commissioner, as the case may be, if the assessee has concealed the particulars of his income or has furnished inaccurate particulars of such income. Therefore, the Assessing Officer has first to satisfy as to whether the assessee concealed the particulars of income or has furnished inaccurate particulars of such income. In so far as this fact is concerned, all the three authorities in unison have come to the conclusion that the intention of the assessee was to evade tax and it would be appropriate to quote the factual finding of Income-tax Appellate Tribunal while sustaining disallowance of depreciation. The Income-tax Appellate Tribunal, vide order dated May 26, 2005, while sustaining the disallowance of depreciation, specifically came to the conclusion that there was a colourable device in between two interconnected companies and the findings arrived at by the Income-tax Appellate Tribunal is reproduced ad infra : We have heard both the parties at length and gone through the material available on record from which it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding having not been properly acted upon. We need not quote the language of the two memorandum of understandings entered into by and between the assessee and Punsumi India Ltd. dated October 5, 1992, and April 20, 1993, but in the quantum (regular) proceedings all the three authorities have elaborately discussed about the salient features of the memorandum of understandings and after recording finding of fact came to the conclusion that the memorandum of understandings are merely on papers and the entire transaction is sham and colourable one and sustained disallowance of depreciation which is based on appreciation of evidence and the concurrent finding of fact not only by the Assessing Officer but the Commissioner of Income-tax (Appeals) as well as the Income-tax Appellate Tribunal in the quantum proceedings but all the three authorities in unison in the present proceedings have again held that the memorandum of understandings were merely on papers and had not been acted upon. It is also a finding of fact that not a single amount passed in between both the parties except the book adjustments which remained on paper only. 10. Once the addition was sustained by the Income-tax App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a different conclusion. Before the Income-tax Appellate Tribunal, one additional fact was mentioned that the claim was made on account of mistake on the part of the auditor and because of the mistake of the auditor, the assessee ought not to have been penalised . However, the assessee has not been able to substantiate its claim as to how there was a mistake on the part of the auditor and there is no affidavit or explanation of the auditor that a mistake was committed by the auditor in giving an advise in the manner the depreciation was claimed. The finding of the Income-tax Appellate Tribunal is based on facts that there is no explanation on record to suggest that the claim of depreciation made by the assessee was bona fide. There is a difference between a wrong claim and a false claim. If there is a wrong claim on the basis of a bona fide opinion, then penalty perhaps is not imposable. If the claim is debatable as per the decision of different appellate authorities, then also penalty is not leviable. However, if the claim is false then penalty is definitely leviable. 12. In the impugned order of the Income-tax Appellate Tribunal as well as the other authorities, in the writ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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 for 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 is found to be bona fide. If the explanation is neither substantiated nor shown to be bona fide, the Explanation under section 271(1)(c) would come into play and the assessee would be liable for the prescribed penalty. A claim made by the assessee needs to be bona fide and if the claim, besides being incorrect in law, is mala fide, Explanation 1 to section 271(1)(c) would come into play and work to the disadvantage of the assessee. We have already observed hereinabove and the finding of the Income-tax Appellate Tribunal, which is a final fact finding authority that the assessee claimed depreciation which was never allowable and the assessee was aware of the true nature of the transaction despite which the claim for depreciation was made. Its claim was rejected by the Tribunal in the quantum proceedings and that order has attained fi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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