DEMOSHA CHEMICALS PVT LTD AND ORS vs. THE STATE OF MAHARASHTRA AND ORS

1 1----WP-2830-12-2012.docx rsk IN THE HIGH COURT OF JUDICATURE AT BOMBAY CRIMINAL APPELLATE JURISDICTION WRIT PETITION NO.2830 OF 2012 M/S. Demosha Chemicals Pvt Ltd And Ors : Petitioners. Versus The State Of Maharashtra And Ors : Respondents ______________________________________________________ Mr. Jas Sanghavi a/w. Mr. Vikas Poojary i/b PDS Legal, for the Petitioners. ______________________________________________________ CORAM Jitendra Jain, J. DATED: 04 AUGUST 2025 PC:- 1. The said writ petition was admitted on 17 April 2013 but on none of the occasions i.e. on 1 August 2022, 5 September 2012, 11 March 2013, 3 April 2013, 17 April 2013 and 5 May 2014 respondent Nos.2 to 5- Revenue appeared. 2. Today, the matter is for final hearing and even today none of the respondents-Revenue have appeared although vakalatnama has been filed. 3. The petition challenges the Complaint No.367/S/1999 filed by the respondents with the Additional Chief Metropolitan Magistrate, 47th Court Esplanade. 4. The prosecution is launched under Section 276-C, 277 read with 278 of the Income Tax Act, 1961. 5. For the Assessment Year 1984-1985, petitioner no.1 made a claim of depreciation and investment allowance with respect to certain purchase of machinery, In the course of

2 1----WP-2830-12-2012.docx assessment proceedings, a query was raised with respect to the said claim on the ground that the machinery has not been installed and used. 6. Petitioner filed the evidence in support of his claim which was not accepted by the Revenue and the claim came to be disallowed. 7. Petitioner No.1 did not challenge the said rejection of claim of depreciation and investment allowance by filing an appeal. However, the Assessing Officer levied penalty of Rs.92,508/- on said rejection of claim of depreciation and investment allowance. 8. The penalty appeal reached the Tribunal and the Tribunal vide its order dated 20 February 2001 deleted the penalty. The relevant observations of the Tribunal in this regard reads as under: “6. We have given our careful consideration to the rival contentions. In this case the sessee had purchased the machinery. The revenue has not disputed this fact. The machinery had also been despatched from Calcutta to Bombay. Evidence relating to the despatch as well as receipt of the machinery in Bombay in the previous year relevant to assessment year under appeal is on record. Though it is stated that the transportation of the machinery within the period stated by the appellant is impossible, no evidence whatsoever has been produced by the revenue in support of the claim. It is well-settled principle of law that when a party has produced evidence in support of the claim the burden shifts to the other side to rebut the same. In this case the assessee has furnished some evidence from the transporter. The Department on the other hand has simply made a claim without supporting the same. Therefore, the evidence furnished by the assessee for the

3 1----WP-2830-12-2012.docx purposes of levy of penalty has got to be accepted. 7. With regard to the installation of the machinery there are two versions one is that of the revenue and another that of the assessee. The version of the revenue that the machinery was not installed is more probable than the version given by the assessee. However, at the same time it cannot be said that the version given by the assessee is improbable. In such circumstances we are of the considered view that penalty under section 271(1)(c) is not warranted as the benefit of doubt has to be given to the assessee. It is observed from the decision of the Tribunal in quantum appeal, to which one of us is a party, that the addition has been confirmed on preponderance of probabilities. Whereas addition on preponderance of probabilities would be justified, when it comes to levy of penalty the benefit of doubt has got to be given to the assessee. In this view of the matter we are of the view that it is not a fit case for levy of penalty under section 271(1)(c) without taking into account the Explanations. The contention on behalf of the assessce that the revenue is precluded from invoking Explanation to section 271(1)(c) is well founded in view of the decisions of the Bombay High Court in the case of PM Shah, (supra) and in the case of Dharamchand L Shah (supra)” 9. Heard Mr. Jas Sanghavi, learned counsel for the petitioner. He submits that complaint was filed with Esplanade Court but later on transferred to Ballard Pier. 10. I have perused copy of the complaint and documents annexed thereto. The Only issue on which prosecution has been launched is in respect of claim of depreciation and investment allowance for the Assessment Year 1984-1985. The Tribunal being a final fact finding authority in the penalty

4 1----WP-2830-12-2012.docx order has deleted the penalty by observing that the documents filed by the petitioner in support of its claim has not been rebutted by the Revenue and rejection of claim is based on preponderance of probability. Furthermore, the claim of depreciation is only a timing allowance in the sense that if the depreciation is not allowed in this year then same is to be allowed in the next year on the basis of installation and use of machinery. The fact of purchase of machinery is not in dispute. Based on these facts, in my view no case is made out for willful attempt to evade tax. It is also important to note that in the assessment order various other dis-allowances were made but all were deleted by the appellate authorities. 11. In the light of these facts and further by considering that the claim of depreciation and investment allowance is only Rs.92,508/-, I see no ground made out for prosecution under Section 276 C read with 277 and 278 of IT Act. 12. Petition is allowed in terms of prayer clause (a). “(a) this Hon’ble Court be pleased to call for the records and proceedings of the case originally numbered as 144/S/1988 and presently registered as case No.367/S/1999 pending on the file of the learned Additional Chief Metropolitan Magistrate, 47th Court, Esplanade, Mumbai and after examining the legality and validity thereof be pleased to quash and set aside all the proceedings in said Case No.367/S/1999 pending on the file of Additional Chief Metropolitan Magistrate, 47th Court, Esplanade, Mumbai.” 13. Rule is made absolute in the above terms. (Jitendra Jain, J)