M/S. ICICI BANK LTD.,MUMBAI vs. DCIT RG. - 3 (1), MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा सद� राजे� के अनुसार PER RAJENDRA, AM- Challenging the order dt.9.3.2005 of the CIT(A)-XXVII, Mumbai the assessee had filed the present appeal . Assessee- company filed its return of income on 30.12.1993 declaring total income of Rs.1,37, 66,09,450/-.The Assessing Officer (AO) completed the assessment on 28.3.1996, u/s 143(3) of the Act,assessing its income at Rs.164.50 crores. While completing the assessment, the AO made an addition of Rs.25.00 crores on account of depreciation on the assets leased to Gujarat Electricity Board(GEB).As per the AO,the assessee ha leased specialized high efficiency boiler package and auxiliaries to GEB under a sale and lease back arrangement scheme, that it had declared lease rental income Rs.1.18 crores,that it claimed depreciation @50%, that elaborate enquiries were conducted in that regard,that the AO had held that the assessee had no right of ownership on the assets leased to GEB,that the sale and lease back transaction was a sham transaction that was entered into with a view to avail depreciation benefit and thereby reduce the taxable income.Penalty proceedings u/s. 271(1)(c) of the Act were initiated on the ground that assessee had made a wrong claim of depreciation by furnishing inaccurate particularrs.In response to the show cause notice for levying concealment penalty the assessee filed detailed explanation,vide its letter dt. 17.4.96. 1.1In the meanwhile,the addition made by the AO was confirmed by the First Appellate Authority (FAA).The assessee preferred an appeal before the Tribunal.Vide its order dt.14.8.2003, the Special Bench of the Tribunal-constituted for the purpose of deciding the issue of depreciation to be allowed on sale and lease back assets-held that the assessee was not entitled to depreciation allowance in respect of assets/equipment leased out to GEB.Considering the above facts and referring to the order of the Special Bench,the AO held that the assessee had concealed the particulars of its income.Finally, he levied a penalty of Rs.12.93 crores u/s. 271(1)(c) of the Act.

ITA 4903/M/05(93-94)-ICICI Bank Ltd.

2.Aggrieved by the order of the AO, the assessee preferred an appeal before the FAA.After considering the submission of the assessee,the assessment order, penalty order and the order of the Special Bench,the FAA held that Tribunal had held that it was a transaction of finance and had to be treated as such. He referred to the cases of K.C. Builders (265 ITR 562), Mussadilal Ram Bharose(165ITR14)and held that there was difference between returned and assessed income,that the assessee had offered an explanation that was found to be incorrect, that the transaction entered into by the assessee was a sham transaction, that the assessee had not been able to discharge its onus, that Explanation-1 to section 271(1) were applicable to the facts of the case.Finally,he upheld the order of the AO levying the concealment penalty. 3.During the course of hearing before us,the Authorised Representative(AR)stated that the assessee had not concealed particulars of income or had filed inaccurate particulars of income, that in AY.1995-96 depreciation on all leased assets,including the similar assets leased to GEB post the Special Bench decision,was allowed,that depreciation claimed u/s.32 in respect of leased asset was a debatable legal issue, that the assessee had filed an appeal against the order of the Special Bench of the Tribunal before the Hon’ble Bombay High Court, that the Court had admitted the appeal filed by the assessee,that the issue raised in the quantum appeal had become debatable and hence, no concealment penalty could be levied, that decision was in favour of the assessee at the time of filing of return of income, that the Tribunal had delivered a favourable decision for AY 1995-96(115ITD25), that Special Bench had relied upon the case of McDowell, that the law laid down by McDowell was no longer a good law after the decision of Azadi Bachao Andolan and Anr.(263 ITR 706).She referred to the case of IndusInd Bank Ltd. (ITA No.2839/ Mum/2008), IndusInd Bank Ltd. (55 Taxmann 408), Development Credit Bank (ITA 5490/Mum/2010); HDFC Ltd. (ITA No.4886/87 of 2010); Nayan Builders and Developers Pvt. Ltd. (231Taxmann 665); Roopam Mercantile Ltd. (91 ITD 237); Advaita Estate Development Pvt. Ltd.(147 ITD 693);Schrader Dunken Ltd.(ITA No.8223/M/2010 dt.1.12015),and argued that the transaction with GEB and the assessee was between a Financial Institution and a PSU, that the same could not be termed a device to evade tax,that the finding that the transaction was not genuine, was contrary to well settled principle that Government could not be a party to a sham transaction, that penalty could not be levied merely because the sale and lease back transaction as re-characterised as financial transaction. Departmental Representative(DR) stated that issue was not debatable and hence the judgment of Nayan Builders and Developers (supra), was of no help to the assessee, that the Special Bench of the Tribunal had termed the sale and lease back transactions as sham transaction, that the boiler was purchased from BHEL, that it could not be leased out,that transaction was aimed to reduce the taxable income of the assessee.He referred to the case of Popular Jewelers (238 ITR 676), Prakash S. Vyas(Tax Appeal No.660 of 2010 dt.15. 11.2011), Soft Touch Hygiene Products Pvt. Ltd.(Tax Appeal No.2146 of 2010 dt.20.12.2011) of Hon’ble Gujarat High Court, Avasarala Automation Ltd(266 ITR 178); Sundaram Finance Ltd. (353ITR375);TVS Finance & Services Ltd.(125 ITD 341); BPL Sanyo Finance(362 ITR 630); Times Guarantee Ltd. (1681/M/2007,AY-93-94)dt.10.10.2016; 4.We have heard the rival submissions and perused the material before us.We find that vide its order dated 3.3.2004,(Income tax Appeal No.8 of 2004),the Hon’ble Bombay High Court has admitted a substantial question of law with regard to the issue of allowability of depreciation on assets leased by the assessee to GEB.