Mitco Management Services P.Ltd, ... vs Assessee

सव ौी ड . मुमोहन, उपा य! एवं नरे ि कुमार %ब&लै(या, लेखा सदःय के सम!

BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND

SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER

आयकर अपील सं./I.T.A. No. 4953/Mum/2012 िनधा रण वष / Assessment Year : 1997-98 (िनधा

M/s. Mitco Management बनाम The ITO 1(2)(3), बनाम/ Services Pvt. Ltd., Aayakar Bhavan, Vs. 414, Rewa Chambers, Mumbai Sir V.T. Marg, New Marine Lines, Mumbai-400 020 ःथायी ले खा सं . /जीआइआर सं . /PAN/GIR No. : AACCM 1587B (अपीलाथ0 /Appellant) .. (ू2यथ0 / Respondent) अपीलाथ0 ओर से/ Appellant by: None

ू2यथ0 क4 ओर से/Respondent by: Shri Vivek Batra

सुनवाई क4 तार ख / Date of Hearing :10.03.2015 घोषणा क4 तार ख /Date of Pronouncement :10.03.2015

आदे श / O R D E R

PER N.K. BILLAIYA, AM:

This is an appeal by the assessee directed against the order of the Ld. CIT(A)-2, Mumbai dt. 3.5.2012 pertaining to assessment year 1997-

98. 2 ITA No. 4953/M/2012

2. The sole grievance of the assessee is that the Ld. CIT(A) erred in upholding the levy of penalty of Rs. 6,56,524/- u/s. 271(1)(c) of the Act.

3. The roots for the levy of penalty u/s. 271(1)(c) of the Act lie in the assessment order dt. 29.12.2006 made u/s. 143(3) r.w. Sec. 254 of the Act. In this case the original assessment was completed u/s. 143(3) of the Act vide order dt. 30.3.2000. The total income assessed was at Rs. 20,80,231/-. In the original assessment, the claim of depreciation on automatic loan monitoring system claimed to have been purchased and leased back to M/s. Asian Electronics was disallowed by treating the lease transaction as a financial transaction. The amount of depreciation disallowed was Rs. 15,26,800/-. The matter travelled upto the Tribunal and the Tribunal vide order dt. 18.5.2004 in ITA No. 2020/M/01 set aside the issue to the file of the AO for a fresh determination in accordance with law on merits and after considering the ratio of the ITAT Mumbai 'C' Special Bench in the case of M/s. Mid East Portfolio Management Ltd. Vs DCIT 87 ITD 537.

4. After considering the facts of the assessee vis-à-vis facts in the case of M/s. Mid East Portfolio Management Ltd.(supra), the AO came to the conclusion that the facts in the case of the assessee and the facts discussed in the case of M/s. Mid East Portfolio Management Ltd. are similar. The AO further observed that in the case of M/s. Mid East Portfolio Management Ltd., the Tribunal has upheld the disallowance of depreciation. The AO further observed that in this case, it has been proved beyond doubt that the transaction of so called lease entered into between the assessee and M/s. Asian Electronics is actually a finance transaction. The claim of depreciation was once again disallowed and the penalty proceedings u/s. 271(1)(c) were initiated.

3 ITA No. 4953/M/2012 5. The assessee was given an opportunity to explain why penalty u/s. 271(1)(c) of the Act should not be levied in view of the order of the First Appellate authority confirming the disallowance made by the AO in his order u/s. 143(3) r.w. Sec. 254 of the Act. Vide reply dt. 18.3.2010, the assessee contended that it has neither concealed any particulars nor furnished any untrue particulars of its income. It was pointed out that the disallowance should not have been made as the claim of the assessee was bonafide. It was further pointed out that against the order of the Ld. CIT(A), the assessee has preferred an appeal before the Tribunal and the appeal has been adjourned because a Special Bench has been constituted in the case of M/s. Indusind Bank Ltd. in ITA No. 6566/M/02 & 606/M/03. After considering the facts and the submissions, the AO observed that under the facts and the circumstances, the sale of lease back transaction is not at all a genuine transaction. In the opinion of the AO, the assessee's contention that it has not filed any untrue particulars is not correct. Drawing support from the decision of the Hon'ble Supreme Court in the case of Dharmendra Textiles Processors & Others 306 ITR 277, the AO concluded by levying penalty of Rs. 6,56,524/-.

6. Aggrieved by this, the assessee carried the matter before the Ld. CIT(A) and reiterated its claim and relied upon the decision of the Tribunal in the case of Cable Corporation of India Ltd. in ITA Nos. 2366, 2416 & 3433/M/2000. After considering the facts and the submissions, the Ld. CIT(A) held as under:

"After examining the facts and circumstances of the case, I find that the appellant company has furnished inaccurate particulars of income because the a appellant company has tried to claim depreciation of Rs.15,26,800/- on 88 machines each costing Rs.34,700/- without establishing the facts that these machines were actually sold by Asian Electronics Ltd. on 31.03.1 4 ITA No. 4953/M/2012

97 to the appellant company and on the same date, i.e. 31.03.1997 the appellant company had delivered back the same equipments to M/s Asian Electronics Ltd. at Silvassa and these machineries were installed and put to use on 31.03.1997. All these transactions are highly unbelievable and does not appear to be genuine. My predecessor CIT (A) while disposing off the quantum appeal have given enough reasons to show that intention of the appellant company was to claim excessive depreciation with a view to reduce its taxable profit and, therefore, addition was confirmed in this case. The argument of the Authorized Representative that the penalty may be deleted in view of the decision of ITAT, Mumbai in the case of JCIT, Spl Range 54 Vs Cable Corporation of India Ltd. is totally unacceptable because facts and circumstances in that case were totally different. Further, that decision does not deal with imposition of penalty u/s.271(1) (c ) of the Income-tax Act on bogus transactions. Since it is a clear case of furnishing inaccurate particulars of income by the appellant firm, I do not find any reason to interfere with the penalty order passed by the Assessing Officer. The penalty imposed by the Assessing Officer u/s 271(1)(c) of the Income-tax Act is confirmed. These grounds appeal have no merit and accordingly, stand dismissed."

7. None appeared on behalf of the assessee. We find that on earlier occasion, the assessee sought adjournment vide letter dt. 6.9.2014, accordingly, the case was adjourned for this day. This was in the knowledge of the assessee, therefore, we decide to proceed ex parte.

8. The Ld. DR strongly supported the orders of the authorities below.

9. We have carefully perused the orders of the authorities below. In the first round of litigation against the quantum addition which was disallowance of depreciation, the Tribunal has directed the AO to decide the issue afresh in the light of the decision of the Special Bench in the case of M/s. Mid East Portfolio Management Ltd. (supra). The AO has rightly followed the decision of the Tribunal in the case of M/s. Mid East Portfolio Management Ltd. Having disallowed the depreciation, once again penalty proceedings were initiated. We find that the assessee was 5 ITA No. 4953/M/2012

given sufficient opportunity to explain its case and the assessee did respond during the penal proceedings stating that it has preferred an appeal before the Tribunal against the order of the Ld. CIT(A) which is pending for disposal subject to the outcome of the Special Bench constituted in the case of Indusind Bank (supra). However, we do not find any order of the Tribunal on record in the case of the assessee. In all fairness, the issue relating to the claim of depreciation on sale and lease back transaction is somewhat settled by the decision of the Hon'ble Supreme Court in the case of ICDS Ltd (2013) 29 taxmann.com 129. However, the ratio of the decision of the Hon'ble Supreme Court is applicable only in the case of genuine sale and lease back transaction.

9.1. In the case in hand, we find that the additions have been made on finding that the so called lease entered into between the assessee and Asian Electronics is actually a finance transaction. The factual matrix as elaborately discussed by the Ld. CIT(A) at para-2.3 of his order (supra) clearly establishes that not only the claim of depreciation is not allowable but also the assessee has furnished inaccurate particulars. We, therefore, do not find any reason to interfere with the findings of the Ld. CIT(A).

10. In the result, the appeal filed by the assessee is dismissed.

Order pronounced in the open court at the time of hearing on 10th March, 2015

Sd/- Sd/-

(D.MANMOHAN ) (N.K. BILLAIYA) उपा य! / VICE PRESIDENT लेखा सदःय / ACCOUNTANT MEMBER मुंबई Mumbai; 8दनांक Dated : 10th March, 2015 व.िन.स./ RJ , Sr. PS व.िन.स./ RJ , Sr. PS 6 ITA No. 4953/M/2012

आदे श क4 ूितिल%प अमे%षत/Copy षत of the Order forwarded to : 1. अपीलाथ0 / The Appellant 2. ू2यथ0 / The Respondent. 3. आयकर आयु:(अपील) / The CIT(A)- 4. आयकर आयु: / CIT 5. %वभागीय ूितिनिध, आयकर अपीलीय अिधकरण, मुंबई / DR, ITAT, Mumbai 6. गाड फाईल / Guard file. आदे शानुसार/ ार BY ORDER, स2या%पत ूित //True Copy// उप/सहायक उप सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, अिधकरण मुंबई / ITAT, Mumbai