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2022 Supreme(Mad) 2411
IN THE HIGH COURT OF JUDICATURE AT MADRAS
R. MAHADEVAN, MOHAMMED SHAFFIQ, JJ.
Commissioner of Income Tax-I, Chennai - Appellant
Versus
M/s. ICICI Bank Limited, (Erstwhile Bank of Madura Ltd.) Chennai - Respondent
Tax Case Appeal Nos. 440 & 441 of 2011
Decided On : 19-07-2022
For the Appellant:R. Hemalatha, Advocate. For the Respondent:Vijaya Raghavan, Subbaraya Aiyar, Advocates.
The success of appeals against assessment orders, which form the basis for imposing penalties, can lead to the cancellation of penalties under section 271(1)(c) of the Income Tax Act, 1961.
Headnote:
Penalty - Depreciation Claim - Income Tax Act, 1961 - Section 271(1)(c) - Section 44A - Section 147 - Section 143(3) - Section 148 - Section 274 - Explanation 1 - Section 260 A - Assessment Years 1999-2000 and 2001-02
Fact of the Case:
The appellant/Revenue filed Tax Case Appeals against the order of the Income Tax Appellate Tribunal relating to the assessment years 1999-2000 and 2001-02. The appeals challenged the cancellation of penalties levied under section 271(1)(c) of the Income Tax Act, 1961, due to false claims of depreciation on windmills.
Finding of the Court:
The Tribunal's decision to cancel the penalties was upheld by the court based on the success of the assessee's appeals against the assessment orders, which formed the basis for imposing the penalties.
Issues: The main issue was whether the penalties under section 271(1)(c) were rightly cancelled by the Tribunal despite the false claims of depreciation on windmills by the assessee.
Ratio Decidendi: The court held that since the assessment orders, which formed the basis for imposing the penalties, were set aside, the question of imposing penalties did not arise. The court cited various precedents to support this decision.
Final Decision: The Tax Case Appeals filed by the Revenue were dismissed, and no costs were awarded.
JUDGMENT
(Prayer: Tax Case Appeals filed under Section 260 A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, 'C' Bench, Chennai, dated 03.12.2010 in I.T.A.Nos.1500 & 1501/Mds/2010.)
Common Judgment:
R. Mahadevan, J.
1. Challenging the order of the Tribunal dated 03.12.2010 relating to the assessment years 1999-2000 and 2001-02, these Tax Case Appeals have been filed by the appellant/Revenue.
2. By order dated 28.09.2011, this Court admitted these Tax Case Appeals on the following substantial questions of law:
TCA.No.440 of 2011:
"1. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in cancelling the penalty of Rs.7,87,50,000/- levied under section 271(1)(c) of the Income Tax Act, 1961, even though the assessee had made a false claim of depreciation on the sale and lease back transactions relating to windmills electric generators, where the assessee itself was not the owner of lands on which the generators had been installed and hence could not be treated as owner of the windmills?
2. Whether on the facts and in the circumstances of the case the Income-Tax Appellate Tribunal was right in not holding that the penalty had been rightly levied since the assessee had made a false claim of depreciation on wind electric generators when the assessee was not recognized as the owner by the Electricity Boards?”
TCA No. 441 of 2011:
“1. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in cancelling the penalty of Rs.7,60,00,000/- levied under Explanation 1 to section 271(1)(c) of the Income Tax Act 1961, even though it had been established that the assessee had claimed depreciation on the assets which were not owned by it, but which were already owned by M/s.Indo Wind Energy Ltd., on the basis of invoices for purchase which were not genuine?”
3. Briefly stated facts are as follows:-
For the Assessment Year 1999-2000, the respondent-assessee bank filed their return of income on 24.11.1999 declaring a total income of Rs.11,19,56,750/-. The original assessment under Section 143(3) was completed on 28.02.2001 determining the total income at Rs.30,32,17,830/- which was subsequently revised to Rs.30,89,67,236/-. In the revised assessment order, the Assessee's claim on depreciation on windmills leased out to four different parties, was disallowed, along with the other claim. Aggrieved by the same, the assessee filed an appeal on 02.04.2001. When the appeal was pending, the assessment was re-opened by the Assessing Officer by issuing a notice under Section 148 of the The Income Tax Act (in short, the Act) on 27.03.2003. The re-assessment proceedings under Section 143 (3) read with Section 147 was completed on 31.03.2004. As per the re-assessment order, while retaining the disallowances made in the original assessment, further addition and disallowances were made towards broken period interest, depreciation securities etc. Thus, in the re-opened assessment, the total income of the assessee was determined at Rs.48,36,45,000/-. Subsequently, a notice under Section 274 was issued for initiating the penal action under Section 271 (1) (c) of the Act. As against the re-assessment order as well as the penalty proceedings, the assessee filed appeals before the Commissioner of Income Tax (Appeals) and the said appeals were disposed of, by a common order dated 15.10.2004 confirming the disallowance of depreciation of Rs.22,50,00,000/- with a direction to provide opportunity to the assessee before completing the penalty proceedings. Accordingly, an opportunity was given and the assessee filed their detailed written submissions on 23.02.2006. Thereafter, the Assessing Officer, by an order dated 28.03.2006 concluded that the assessee had intentionally furnished inaccurate particulars of their income by making false claim and it attracts penal action under Section 271 (1) (c) of the Act. Thus, the Assessing Officer, after
