L & T FINANCE LTD,MUMBAI vs. ASST CIT CIR 2(2), MUMBAI

The grounds of appeal raised by the assessee in the memo of appeal filed with the Income Tax Appellate Tribunal, Mumbai (hereinafter called “the Tribunal”) reads as under:-

The brief facts of the case are that the assessment in this instant case was framed by the AO u/s 143(3) of the Act vide orders dated 20.01.2005 whereby the clam of assessee of depreciation on assets on ‘sale and lease back’ basis was disallowed. It was observed by the AO that the assessee has claimed depreciation of Rs. 30,29,07,166/- which included depreciation of Rs.28,76,04,152/- on assets pertaining to various lease transactions entered into by the assessee during the previous year as well earlier years. In respect of the assets given on lease in earlier years, the depreciation of Rs.19,10,02,606/- was claimed during the year. It was observed that except for the assessment year 1997-98 , the lease transaction of the assessee had been held to be financial transaction in the assessment year 1995-96 to 2000-01 and depreciation on the leased asset had been disallowed in the hands of the assessee. In the assessment year 1997-98 , depreciation with respect to some of the assets was allowed following directions of the learned CIT(A). The claim of the depreciation of the assessee to the tune of Rs. 17,63,00,871/- was disallowed with respect to depreciation on the assets given on lease in earlier years following the Revenue stand with respect to ITA 3606/Mum/2014 3 such assets in the quantum assessment proceedings. Similarly , claim of depreciation for leased asset of Rs.9,66,01,546/- with respect to assets given on lease during the year also stood disallowed in quantum assessment proceedings vide assessment order dated 20.01.2005 passed by the AO u/s 143(3) of the Act. The learned CIT(A) confirmed the quantum disallowance vide appellate orders dated 07-04-2010 whereby appeal of the assessee was dismissed in quantum proceedings.The penalty proceedings were initiated u/s 271(1)(c) of the Act against the assessee for furnishing inaccurate particulars of the income. The AO issued notices u/s 274 r.w.s. 271(1)(c) of the Act show causing that why penalty should not be levied against the assessee for furnishing of inaccurate particulars of income , wherein the assessee replied that the assessee has filed an appeal with the Tribunal in quantum assessment and the penalty proceedings be kept in abeyance. The AO levied penalty of Rs.2,15,25,626/- being computed @100% on tax sought to be evaded vide penalty order dated 30th March 2012 passed u/s 271(1)(c) of the Act which was confirmed by the learned CIT(A) vide appellate orders dated 05.02.2014 . The learned CIT(A) observed that the AO has computed penalty u/s 271(1)(c) of the Act on the amount of Rs.6,15,01,776/- with respect to which the assessee furnished the inaccurate particulars of income, while the assessee infact furnished inaccurate particulars of income of Rs.27,29,02,417/- which ought to have been considered by the AO for levying of penalty u/s. 271(1)(c) of the Act and thus, the learned CIT(A) directed AO to verify the computation and re-compute amount of penalty on the said amount, vide appellate orders dated 05.02.2014 passed by the learned CIT(A).

Aggrieved by the appellate orders dated 05.02.2014 passed by the learned CIT(A), the assessee is in appeal before the Tribunal.

At the outset , learned counsel for the assessee submitted that the Tribunal in assessee’s own case in vide orders dated 05-05- ITA 3606/Mum/2014 4 2015 for impugned assessment year 2002-03 under appeal has decided the issue in assessee’s favour in quantum whereby the Tribunal has held that the assessee is entitled to claim depreciation in respect of the assets given under “sale and lease back basis” and hence since quantum is decided by the Tribunal in favour of the assessee, the penalty order will not survive. It was submitted that Tribunal has in ITA No. 6991-6994/Mum/2011 vide common orders dated 05.05.2015 in assessee’s own case has allowed the claim of the assessee for depreciation on assets given on ‘sale and lease back basis’ for the assessment year 2000-01 to 2003-04. It was also submitted that the Tribunal in MA.No.420 to 422/Mum/2013 vide common order dated 30.04.2014 and MA.No. 423 & 424 /Mum/2013 vide common orders dated 11.07.2014 in assessee’s own case has allowed the claim of the assessee for depreciation on assets given on ‘sale and lease back basis’ for the assessment year 1995-96 to 1999-00 following the judgment of Hon’ble Supreme Court in the case of ICDS Limited v. CIT 350 ITR 527(SC). It was also submitted that the Tribunal has vide common order dated 19/03/2015 in ITA No. 5283- 5285/Mum/2012 for assessment years 1995-96 to 1997-98 in assessee’s own case deleted the penalty levied u/s 271(1)(c) of the Act by the Revenue on disallowance the claim of depreciation on assets given on ‘sale and lease back basis’. All the afore-stated orders of the Tribunal were submitted by learned counsel and are placed in file. On the other hand , learned DR relied upon the orders of the authorities below.

We have considered the rival contentions and perused the material on record. We have observed that the quantum additions made by the Revenue vide assessment framed u/s 143(3) of the Act has been deleted by the Tribunal in the assessee’s own case in vide orders dated 05-05-2015 for the instant assessment year 2002-03 under appeal by holding that the assessee is entitled to claim depreciation in respect of assets given under ‘sale and lease back basis’ The AO was directed to withdraw the ITA 3606/Mum/2014 5 corresponding benefit given to the assessee by excluding the value of capital component of the lease rent from the income of the assessee. The Tribunal has in the assessee’s own case has also allowed the assessee’s claim of depreciation in respect of assets given under ‘sale and lease back basis’ for the assessment years 1995-96 to 1999-00 in MA No. 420 to 422/Mum/2013 vide orders dated 30.04.2014 and also in M.A. No. 423 & 424/Mum/2013 vide common orders dated 11.07.2014 following the judgment of Hon’ble Supreme Court in the case of ICDS Limited v. CIT 350 ITR 527(SC) and the AO was directed to withdraw the corresponding benefit given to the assessee by excluding the value of capital component of the lease rent from the income of the assessee. The Tribunal has also allowed the afore-stated relief for assessment year 2000-01 to 2003-04 vide common orders dated 05-05-2015 in assessee’s own case in ITA No. 6991-6994/Mum/2011 . The Tribunal has also deleted the penalty levied by the AO and as sustained by learned CIT(A) on the disallowance of the assessee’s claim of depreciation in respect of assets given under ‘sale and lease back basis’ for the assessment years 1995-96 to 1999-00 vide common orders dated 19/03/2015 in ITA No. 5283- 5285/Mum/2012 in assessee’s own case. All the afore-stated orders of the Tribunal are placed in file. Under the above circumstances, we are of the considered view that the penalty levied by the AO and as confirmed/sustained by the learned CIT(A) on the disallowance of the assessee’s claim of depreciation in respect of assets given under ‘sale and lease back basis’ for the instant assessment year 2002-03 cannot survive as quantum additions itself had already been deleted by the Tribunal as set out above and hence we order deletion of penalty levied u/s 271(1)(c) of the Act by the AO and as confirmed/sustained by the learned CIT(A). We order accordingly.

In the result, assessee’s appeal in 2002-03 is allowed as indicated above.