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2016 (5) TMI 250 - ITAT MUMBAI

2016 (5) TMI 250 - ITAT MUMBAI - TMI - Depreciation on bio-gas plant - Held that:- In view of the available documentary evidence; the positive affirmation made by WPIL, the lessee who is a party to the lease transaction, regarding the existence of the bio gas pilot plant; the inconsistent statements made by the MD of Niphad SSK Ltd and the incomplete inquiry in the case of IDBI, about the ownership of the bio gas plant, non-existence of bio-gas plant especially during F.Y.1992-93 was not conclus .....

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g Officer only says that assessee has committed a default but what is the nature of default has not been discussed at all. The Assessing Officer is silent on exactly which provisions of section 271 (1 )(c), he is invoking to impose the penalty. This is not justified at all for imposition of penalty. Assessing Officer has not made out a case of what is the default committed and what is the provision of the Income-tax Act applicable in that default for imposing penalty. There is inadequate satisfa .....

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mind based upon a perception of preponderance of probabilities about existence or otherwise of the pilot plants. There is no conclusive deduction in the assessment order or in the first appellate order of quantum appeal. In such a situation, imposition of penalty is not justified and the same is deleted - Decided in favour of assessee - ITA No.5652&7013/Mum/2004, ITA No.5332/Mum/2008 - Dated:- 28-3-2016 - SHRI R.C.SHARMA, AM AND SHRI AMARJIT SINGH, JM For The Assessee : Shri Madhur Agrawal and .....

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ons and found from record that the regular assessment for A.Y.1993-1994 was originally completed u/s.143(3) on 15th March, 1995 by the DCIT, Special Range-25, Mumbai assessing the total income of ₹ 7,50,06,550/-. The assessment was reopened under section 147 based on the investigation report dated 11th November 1996 from the office of the Additional Director of Income Tax (Inv.) Pune. During the previous year 1992-93 corresponding to assessment year 1993-94, the assessee entered into three .....

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gas plant on the ground that the assets were not in existence. 4. By the impugned order, the CIT(A) confirmed the reopening as well as disallowance of claim of depreciation. For the years under consideration the assessee is aggrieved for decline of claim of depreciation as well as validity of reopening for the assessment year 1993-94. 5. It was argued by ld. AR that the CIT(A) erred in confirming the reopening proceedings u/s. 147 without having any reason to believe that any income chargeable .....

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of persons who are not even connected with the lease transaction between M/s. Western Paques India Limited (WPIL) and the assessee. It was further argued by ld. AR that the alleged non committal response of the WPIL representative in his statement dated 5-2-1996 has been stated selectively and out of context. It was further argued by ld. AR that the statement recorded by the AO on 21-2-1997 (and cited at page 11 of the assessment order) relates to the lease transactions of F. Y. 1993-94 (A. Y. .....

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es India Limited (WPIL) on the ground that the assets are not in existence. It was contended that documentary evidence clearly establishes the physical existence of the bio gas pilot plant, especially during the year in which the asset was purchased and leased to WPIL i.e. Financial Year 1992-93. Our attention was also invited to the fact that the lessee, namely WPIL has also confirmed the sale of the new bio gas plant to the assessee, which has been duly accounted by them as income, a fact duly .....

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der for purchase of the main bio-gas plant was placed by Niphad SSK Ltd. with WPIL. Ld. AR vehemently argued that the response of the AO of IDBI dated 14.2.1997 has not been appreciated in its true perspective because the conclusions drawn by the AO seem to be premature and in haste. Having submitted a detailed explanation regarding this lease transaction vide letter dated 25.3.1997, the AO refused the appellant's request for an opportunity of being heard again and instead the assessment was .....

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cal existence of the bio gas pilot plant, especially during the year in which the asset was purchased and leased to WPIL i.e. Financial Year 1992-93. No statement on oath has been recorded of any person while conducting the enquiry regarding the existence of the bio gas plant. The Site Report No.31 clearly shows that no spot verification of the bio gas plant appears to have been conducted by the department. As per ld. AR the letter dated 19.2.96 from the MD of Satara SSK Ltd., on the basis of wh .....

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etter dated 25.3.1997, the AO refused the appellant's request for an opportunity of being heard again and instead the assessment was completed in haste i.e. within 1 month of the reopening of the assessment and in disregard of the principles of natural justice. 9. With regard to decline of claim of depreciation in respect of Bio Gas Pilot Plant, located at Daulat S.S.K.Ltd., it was submitted by ld. AR that CIT(A) erred in disallowing the depreciation amounting to ₹ 25,00,000/-in respec .....

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The physical existence of the Bio-gas pilot plant is further proved in the form of test reports of spent wash treatment relating to WPIL's Daulat SSK Ltd site, during the relevant period. The statements of Shri Gopal Vittal Kulkarni and Shri Gopalrao Motirao Patil have no relevance and / or cannot be relied upon for the reason that their replies stating that Daulat SSK Ltd. has not awarded any type of work for supply of inter alia pilot plants to WPIL and that there is no correspondence mad .....

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plant leased to M/s Western Pacques, was allowed. 10. On the other hand, ld. DR relied on the orders of the authorities below and contended that the AO was correct in declining assessee s claim for depreciation on the Bio Gas Plant. 11. We have considered rival contentions and carefully gone through the orders of the authorities below and found from the record that there was sufficient reason to believe that there an escapement of income as per the findings recorded by the AO on the basis of in .....

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Niphad SSK Ltd. Nasik e) Lorry receipt dated 2.2.93 Ref.GC Note 57 of Manohar Transport Services Pune f) Letter dated 4.11.91. Ref.:WPIL/DDS/92-1011 from WPIL to the MD Niphad SSK Ltd. g) Letter dated 11.2.93 Ref.WPIL/DDS/K-137 from WPIL to Niphad SSK Ltd. h) Letter dated 7.8.93 Ref.Lagoon/93-94/3930 from Niphad SSK Ltd to WPIL i) Certificate dated 4.6.96 issued by the MD of Niphad SSK Ltd. The AO has however relied on the site inspection report compiled by the Pune ADIT wherein it was stated t .....

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id bio gas pilot plant was dispatched to the Niphad SSK Ltd. site on 2.2.93 as evidenced by the delivery challan and the lorry receipt. This fact is also confirmed by the lessee viz. WPIL to the ADIT, Pune during the course of investigation. The statement of Shri Shantaram Laxman Satbhai, MD of Niphad also cannot be relied upon for establishing the fact that no bio gas pilot was installed during the FY 1992-93 because vide his own subsequent letter dated 4.6.96 he has confirmed existence of bio .....

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e AO completed assessment in haste even within a period of one month in disregard of the principles of natural justice. 13. In view of the available documentary evidence; the positive affirmation made by WPIL, the lessee who is a party to the lease transaction, regarding the existence of the bio gas pilot plant; the inconsistent statements made by the MD of Niphad SSK Ltd and the incomplete inquiry in the case of IDBI, about the ownership of the bio gas plant, non-existence of bio-gas plant espe .....

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s. ITA No.5332/Mum/2008(Revenue s Appeal) 16. This is an appeal filed by the revenue against the order of CIT(A) for the assessment year 1993-1994 in the matter of penalty imposed u/s.271(1)(c) of the Act. 17. The penalty has been imposed for decline of claim of depreciation. By the impugned order the CIT(A) deleted the penalty after observing as under :- 10.5 The main contention of the Assessing Officer here is that appellant has not brought any new material or fresh evidence on record to subst .....

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ed a default but what is the nature of default has not been discussed at all. The Assessing Officer is silent on exactly which provisions of section 271 (1 )(c), he is invoking to impose the penalty. This is not justified at all for imposition of penalty. In my view, Assessing Officer has not made out a case of what is the default committed and what is the provision of the Income-tax Act applicable in that default for imposing penalty. There is inadequate satisfaction of the Assessing Officer fo .....

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reponderance of probabilities about existence or otherwise of the pilot plants. There is no conclusive deduction in the assessment order or in the first appellate order of quantum appeal. In such a situation, imposition of penalty is not justified and the same is deleted. 18. We have considered rival contentions. Penalty has been imposed for decline of claim of depreciation. Even as per the decision of Hon ble Supreme Court in the case of Reliance Petroproducts Ltd. 322 ITR 158(SC), penalty cann .....

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e conditions stated therein must exists. The conditions are that the assessee should have concealed the particulars of income or furnished inaccurate particulars of such income before the penalty u/s 271 (1 )(c ) could be levied. This has been reiterated in a recent decision of the Apex Court in C.I.T. v Reliance Petro Products P. Ltd, 322 I.T.R. 158, wherein Hon'ble Apex Court interpreted the meaning of the expressions, "concealment", "inaccurate", and "particulars& .....

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