Jt.Commr.Of Income Tax,Surat vs Saheli Leasing & Industries Ltd

2. The facts of both the appeals being identical, the facts of civil appeal arising out of S.L.P.(C) No.5241 of 2007 are being referred to in this judgment.

3. On a first flush, after bare perusal of the impugned order passed in Revenue Tax Appeal No. 1904 of 2005, decided on 8.8.2006 by Division Bench of the High Court of Gujarat at Ahmedabad, we thought of remanding the matter for a fresh decision on merits, C.As. @ SLP (C) No. 5241 of 2007 etc.... (contd.) 2 in accordance with law but, on a deeper and studied scrutiny, we thought it apt instead of directing to remit, it would be just and proper to consider the matter on merits ourselves and to set at rest the legal controversy involved in the appeal. It is further so that Division Bench in the impugned order has decided the question of law as projected before it in the appeal preferred under Section 260 (A) of the Income Tax Act, 1961, (hereinafter referred to as 'the Act') in a most casual manner. The order is not only cryptic but does not even remotely deal with the arguments which were sought to be projected by the Revenue before it.

15. Penalty was sought to be imposed in respect of an item having an effect in reducing the loss. No appeal was filed against the item, added to the income on account of which the loss was reduced. Admittedly, Assessee, a leasing company had claimed depreciation on plant and machinery @ 100% on various items. The statement of depreciation filed along with the computation of income showed the claim at Rs.1,05,08,824/-. On enquiries being made it was revealed that 100% depreciation was claimed along with Lease Agreements entered into with different parties. Even though, terms and conditions of the Lease Agreements entered into with different parties were the same, except the names of the parties had been changed. Even after dis-allowance of the said depreciation, the taxable income of the Assessee was NIL and hence, there was no tax liability. According to Assessee, in such a case no penalty under Section 271 (1)

16. Deputy Commissioner of Income tax, Special Range-2, C.As. @ SLP (C) No. 5241 of 2007 etc.... (contd.) 7 Surat, on the basis of the discussion in the order held that Assessee was liable to pay penalty, with reference to such additions to income to be treated as its total income, with reference to explanation 4 (a) to Section 271 (1) (c) of the Act. Accordingly, the penalty was levied on concealed income of Rs. 24,22,531/- at minimum rate of 100% of tax sought to be evaded. Thus, a penalty of Rs. 11,14,364/- was imposed on the Assessee.

17. Feeling aggrieved thereof, Assessee preferred an appeal before the Commissioner of Income Tax (Appeals-II). Considering various judgments of the Tribunal and the High Courts, the appeal of the Assessee came to be dismissed and penalty levied on it stood confirmed.

18. Assessee preferred further appeal before the Income-Tax Appellate Tribunal, Ahmedabad. Tribunal, on the strength of an earlier order passed by Special Bench of Ahmedabad Tribunal in the case of Apsara Processors (P) Ltd. and Ors. in ITA No. 284/Ahd./2004 dated 17.12.2004 came to the conclusion that no penalty can be levied, if the returned income and the assessed income is loss. Accordingly, the orders passed by the Assessing Officer as well as Commissioner (Appeals) were set aside and quashed and the penalty imposed on the Assessee was deleted. It was this order of the Tribunal which was carried further by filing C.As. @ SLP (C) No. 5241 of 2007 etc.... (contd.) 8 Appeal under Section 260A of the Act in the High Court, which met the fate of dismissal by the Division Bench.

34. Both cases are distinguishable on the following broad grounds, namely:

(vii) Question of law involved in this appeal is directly covered by the decision of Gold Coin (supra) and is to be answered accordingly.

(viii) Elphinstone (supra), therefore, has no bearing over the view taken in Gold Coin (supra) case and C.As. @ SLP (C) No. 5241 of 2007 etc.... (contd.) 17 even if it had been taken note of, the decision taken therein would have been the same due to aforementioned distinguishing feature.

35. In the light of the aforesaid discussion, we have no doubt in our mind that the ratio of Elphinstone (supra) has C.As. @ SLP (C) No. 5241 of 2007 etc.... (contd.) 18 no application to the facts of the case and the question of law projected stands squarely answered in favour of the Revenue and against the Assessee in Gold Coin (supra) as a result thereof, appeal by Revenue stands hereby allowed. Impugned order passed by Income Tax Appellate Tribunal and confirmed by Division Bench are hereby set aside and quashed. The Revenue, therefore, would be at liberty to proceed further against the Assessee on merits in accordance with law.

36. Appeals stand allowed as mentioned hereinabove but with no order as to costs.

.......................CJI [K.G. Balakrishnan] ....................

May 07, 2010