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2015 (6) TMI 566 - ITAT AHMEDABAD

2015 (6) TMI 566 - ITAT AHMEDABAD - TMI - Penalty u/s 271(1)(c) - disallowances on assessee’s wind mills, interest amount on account of interest bearing funds utilized in interest free advances and the one made under section 40A(3) @ 20% of the cash payment - CIT(A) deleetd penalty levy - Held that:- It is evident that the assessee chose to hand over the windmills back to the vender since the State government had not accorded approval of the ownership transfer. The Revenue sought to tax the very .....

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ntum and penalty proceedings under the Act stand on a different footing and each and every disallowance/addition does not lead to automatic imposition of penalty as held by hon’ble apex court in Reliance Petroproducts Ltd. (2010 (3) TMI 80 - SUPREME COURT ). Therefore, we hold that the Assessing Officer had wrongly held assessee’s case as that of furnishing of inaccurate particulars of income under section 271(1)(c) of the Act. We also find in the same tune that the Assessing Officer has compute .....

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: Shri G. C. Pipara, AR ORDER PER S. S. Godara, Judicial Member. This Revenue s appeal for assessment year 2001-02 arises from order of the CIT(A) -6 Ahmedabad dated 10.8.2011 in appeal No.CIT(A)- VI/DCIT(OSD)R.1/16/10-11, in proceedings under section 271(1)(c) of the Income Tax Act, 1961 (in short the Act). 2. The Revenue s pleading in the present appeal seek to restore section 271(1)(c) arising from disallowances on assessee s wind mills amounting to ₹ 2.40 crores, interest amount of &# .....

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of ₹ 2.40 crores. It would also claim deduction of interest payment amounting to ₹ 60,892/- towards unsecured loans and freight payment in cash of ₹ 8,63,903/-. The Assessing Officer found that the assessee had not become owner of the windmills in question so as to claim depreciation relief. And that it had advanced interest bearing loans without charging any interest. He also found that its freight payments made in cash violated section 40A(3) of the Act. This made him to dis .....

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aware that the impugned interest on unsecured loans was not allowable and that its freight payments (supra) invited section 40A(3) of the Act. He treated the assessee s case as that of furnishing of inaccurate particulars of income and imposed minimum penalty of ₹ 95,86,108/-. The case file reveals that this penalty also included another disallowance of capital expenditure of ₹ 4,275/-. 5. The assessee preferred an appeal. The CIT(A) has accepted the assessee s contentions qua the th .....

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ll, depreciation cannot be claimed. However it is not in dispute that appellant purchased windmill by entering into a MOD and also made the payment of purchase consideration. The proceeds of electricity generated through this windmill were also offered as income by the appellant. All these documents along with the documents submitted by the appellant for transferring the windmill in its name were submitted. It is clear that except the transfer of windmill in the name of appellant, all other proc .....

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ing depreciation on windmill- 1- Purchase bills in respect of windmill 2- Bank statement reflecting payment in respect of windmill purchased 3- Audited accounts of the seller reflecting sale of windmill to the appellant. 4- Account in respect of windmill reflecting income generated from windmill. Considering the above, both appellant and the seller of windmill had given the similar treatment to the transaction. Claim of depreciation is consequential to this transaction. Since several judicial de .....

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evant. The same are not repeated here however these support the appellant's argument that confirmation of addition or rejection of any claim will not automatically result in levy of penalty. AO has to find out what inaccurate particulars were furnished by the appellant. Assessing officer only mentioned that the terms of MOD were not fulfilled still the depreciation was claimed by the appellant. When the matter regarding transfer of name is pending, appellant cannot reverse the transaction in .....

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decisions of Supreme Court relied upon by the appellant supports the view of the appellant that mere rejection of claim cannot attract penalty. In view of this the penalty levied on the rejection of claim of depreciation is not upheld. As regards levy of penalty on disallowance under section 40A (3), appellant submitted that this ground was not pressed before ITAT in quantum appeal however the payment was genuinely made towards freight charges. The disallowance is estimated at the rate of 20% a .....

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s extent is contradictory. The similar interest disallowance in the assessment year 2002-03 was deleted by CIT (A) which was upheld by ITAT. Considering the facts and decisions, penalty cannot be levied for interest disallowance. As regards levy of penalty on claiming capital expense as revenue, appellant did not submit anything. The mobile was costing more that RS 5000 and accordingly the same should have been capitalised. By not doing so appellant claimed excess expenditure to the extent of RS .....

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s of ₹ 2.40 crores being made to the vender entity along with copy of the purchase deed. It also applied for State government s approval. Even the Revenue is fair enough not to dispute these facts. The assessee acquired these windmills in March, 2000. It also declared power generation income of ₹ 9,44,146/-. The assessee further obtained insurance cover for the said windmills. It raised depreciation claim @ 100% in the impugned assessment year only. The same stood declined for want o .....

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to the owner. All these facts indicate that the assessee has not furnished any inaccurate particulars of income. There is nothing attributable on assessee s conduct in not possessing fullfledged ownership. We find that the hon ble apex court in case of Mysore Minerals Ltd. Vs. CIT (1999) 239 ITR 775 interprets the ownership concept for the purpose of depreciation as under :- An overall view of the above said authorities show that the very concept of depreciation suggests that the tax benefit on .....

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