TMI Blog2022 (9) TMI 1369X X X X Extracts X X X X X X X X Extracts X X X X ..... Lower Authorities failed to appreciate that the assessee has obtained mining rights from Government of Gujarat and the assessee also signed a letter of intent with Reliance Industries Ltd. for Development and sale of net electrical output generated to GEB. Thus it cannot be construed that inaccurate particulars have been furnished by the assessee to make a wrong claim u/s. 35E of the Act, thus does not warrant levy of penalty u/s. 271(1)(c) - It is undisputed fact that the lese of sale and leased back of LP Rotor Machines to GEB by the Assessing Officer but denied the benefit on the ground that no change of possession was taken place. Lower Authorities failed to consider that leasing activity is one of the objects of the assesse company and lease rent received has been treated as its business income and assessed to taxes. Consequently the assessee is entitled to claim depreciation on the leased machineries. The sale and leased back transaction entered into by the assessee with GEB which is nothing but an extension of financial assistance to GEB between two Public Sector Undertakings. In order to invoke the penalty proceedings under section 271(1)(c) of the Act, the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come was proved by the assessee was earned from the business of prospecting for or extraction/production of mineral eligible to claim deduction u/s. 35E of the Act. Thereafter the assessee was asked to furnish necessary evidences to substantiate its claim namely whether the assessee was engaged in operations relating to prospecting for or extraction or production of mineral, details of expenses incurred date/month and year wise of commercial production, etc. 2.1. The assessee replied that u/s 10 of the Mines and Minerals (Regulation and Development) Act, 1957, Government of Gujarat has sanctioned grant to the assessee of mining lease for lignite for 30 years in Bhavnagar District. There is also a report from Gujarat Electricity Board (GEB) and Mining Department, Government of Gujarat evidencing that the assessee engaged in the prospecting activities for the minerals. Thus the assessee contended citing the meaning operating relating to prospecting u/s. 35E (5) of the Act that commercial production is not necessary to claim the deduction under the said section. The assessee s alternative claim is that if the 1/10th deduction u/s. 35E Rs. 35,37,800/- is not allowed then the ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Aggrieved against the penalty orders, the assesse filed appeals before the Ld. CIT(A). The Ld. CIT(A) held that the disallowance of deduction u/s. 35E made by the Assessing Officer is upheld by the Hon ble ITAT in assessee s own case. Though the assessee claimed that there was no deliberate intention to avoid taxes and made addition or confirmation of addition would not attract penalty. The Ld. CIT(A) rejected the above plea and relied upon ITAT s order more particularly Para 6.1.0 wherein it was held by the Tribunal that the assessee has not put forth and iota of evidence to substantiate that there was commercial production in the year under consideration and these facts are even not rebutted by the assessee in penalty proceedings. Therefore the assessee has made false claim of deduction u/s. 35E of the Act. 3.1. Following Hon ble Supreme Court judgment in the case of Sundaram Finance Ltd. reported in (2018) 99 taxmann.com 152 wherein SLP dismissed against the Madras High Court Ruling that the assessee claimed depreciation on non-existing assets, penalty u/s. 271(1)(c) was to be levied for filing inaccurate particulars of income. The Ld. CIT(A) further relied upon Hon ble Supre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either in the Return of Income or during the appellate proceedings and deductions claimed u/s. 35E and depreciation u/s. 32 are claimed are also well in accordance with law. The disallowance are made on account of difference of opinion in interpreting the provisions of law. Thus there is no concealment of income. Penalty u/s. 271(1)(c) can be levied only, if the assessee has furnished inaccurate particular of the income or in concealment of income. 4.2. The expression furnished inaccurate particulars of income has not been defined in the Act, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars. In order to levy penalty for furnishing inaccurate particulars of income, the assessee must be found to have failed to prove that his explanation not only bonafide, but all the facts relating to the same and material to the computation of its income were not disclosed by it and relied upon the Hon ble Supreme Court judgment in the case of CIT vs. Reliance Petroproducts Pvt. Ltd. [2010] 189 taxmann.com 322, the Jurisdictional High Court judgment in the case of CIT vs. Gujarat Gas Co. Ltd. [2009] 308 ITR 243 and the Hon ble Madras High Court in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Co-ordinate Bench of this Tribunal has confirmed the disallowance u/s. 35E only on the ground that the assessee does not meet the parameters of eligibility prescribed within section 35E of the Act and the assessee also failed to commence the commercial production during the assessment year 2003-04. 7. The Lower Authorities failed to appreciate that the assessee has obtained mining rights from Government of Gujarat and the assessee also signed a letter of intent with Reliance Industries Ltd. for Development and sale of net electrical output generated to GEB. Thus it cannot be construed that inaccurate particulars have been furnished by the assessee to make a wrong claim u/s. 35E of the Act, thus does not warrant levy of penalty u/s. 271(1)(c) of the Act. It is undisputed fact that the lese of sale and leased back of LP Rotor Machines to GEB by the Assessing Officer but denied the benefit on the ground that no change of possession was taken place. The Lower Authorities failed to consider that leasing activity is one of the objects of the assesse company and lease rent received has been treated as its business income and assessed to taxes. Consequently the assessee is entitle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f his 'income. When such particulars are found to be inaccurate, the liability would arise. [Para 8] The word 'particulars' must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. In the instant case, there was no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under section 271(l)(c). A mere making of the claim, which is not sustainable in law by itself will not amount to furnishing of inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars. [Para 9] The revenue contended that since the assessee had claimed excessive deductions knowing that they were incorrect, it amounted to concealment of income. It was argued that the falsehood in accounts can take either of the two forms: (i) an item of receipt may be suppressed fraudulently; (ii) an item of expenditure may be falsely (or in an exaggerated amount) claimed, and both types attempt to reduce the taxable income and, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g initiated action under section 147 for treating the transaction as a non-genuine transaction. Whether the transaction of leasing out electrical equipments to the Rajasthan Electricity Board was genuine or not, was based on appreciation of evidence on record as found by the Tribunal by referring to the various documents like invoice, etc. In the absence of any evidence to show anything to the contrary no legal infirmity existed in the impugned order of the Tribunal so as to give rise to any question of law, much less a substantial question of law. 10. The Hon ble Madras High Court in the case of CIT vs. Cholamandalam Investment Finance Co. Ltd. (cited supra) held that where the A.O. failed to give independent finding that there was a deliberate design on the part of the assessee to inflate cost of acquisition so as to claim higher depreciation, penalty could not be imposed and held as follows. 8. In order to invoke the penalty proceedings under section 271(1)(c) of the Act, the Revenue should prove that the claim made was not sustainable in law and if the assessee had made a concealment of the particular income.The Hon ble Supreme Court in the case of CIT vs. Reliance Pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated April 26, 2000, has not given any independent finding in support of his conclusion that there was a deliberate design on the part of the assessee to inflate the cost of acquisition. 11. As pointed out by the first appellate authority all the details of the transactions were placed before the Assessing Officer and an explanation was given as to why the market value of the property need not be equivalent to the written down value. The Assessing Officer while completing the assessment proceedings, chose to adopt the written down value. Therefore, that by itself would not amount to furnishing inaccurate particulars or with a view to conceal the actual income. Therefore, the order passed by the Tribunal calls for no interference. Accordingly, the Tax Case (Appeal) fails and it is dismissed. No costs. 11. It is also to be noted the Hon ble Supreme Court judgment in the case of Sundaram Finance (cited supra) relied by the Ld. CIT(A), wherein the lease transaction is not a genuine one and there was no machineries existing in that lease transaction. Therefore on the above facts and circumstances of the case, the Hon ble High Court confirmed the levy of penalty u/s. 271(1)(c) w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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