Case Law Details

Case Name : ACIT Vs Kishangarh Hi Tech Textile Park Ltd. (ITAT Jaipur)
Appeal Number : ITA No. 1337/JP/2019
Date of Judgement/Order : 22/12/2020
Related Assessment Year : 2011-12
Courts : All ITAT (7824) ITAT Jaipur (252)

ACIT Vs Kishangarh Hi Tech Textile Park Ltd. (ITAT Jaipur)

Since the assessee has disclosed entire facts in the Balance Sheet with regard to the subsidy of Rs. 36.00 crores received by it and the depreciation at 80% on the entire windmill as a whole has been claimed on the basis of various decisions of Hon’ble Rajasthan High Court and the subsidy of Rs. 36.00 crores received by the assessee from Ministry of Textile, Government of India was not reduced from the cost of the windmill, as according to the assessee, the Proviso to Explanation 10 of Section 43(1) was not applicable in the case of assessee placing reliance on M/s Lotus Integrated Taxpark Ltd. vs DCIT (supra). Although, in assessee’s case on merits the Coordinate bench has sustained the addition but as far as imposition of penalty, principles are altogether different. In penalty proceedings, we have to consider full and complete disclosure of all facts and figures and in case, the assessee had made disclosure of all facts and figures then in that eventuality no penalty is leviable U/s 271(1)(c) of the Act. Therefore, in view of various decisions discussed above, we are of the considered view that no penalty u/s 271(1)(c) can be levied upon the assessee in respect of the disallowance of depreciation of Rs. 15,07,77,715/- made by the AO. in view of the above facts and circumstances of the case, we do not find any reason to interfere in the order of the ld. CIT(A), accordingly, we uphold the same.

FULL TEXT OF THE ITAT JUDGEMENT

These are the appeals filed by the Revenue against the separate orders of the ld. CIT(A), Ajmer all dated 23/09/2019 for the A.Y. 2011-12 to 2013-14 respectively.

2. All these three appeals of the Revenue have common issues; therefore, all were heard together and for the sake of convenience, a common order is being passed.

3. The hearing of the appeals was concluded through video conference in view of the prevailing situation of Covid-19 Pandemic.

4. Since, common issues have been involved in all these appeals of the revenue, therefore, for deciding the appeal, we take ITA No. 1337/JP/2019 for the A.Y. 2011-12 as a lead case. In this appeal, the Revenue has taken following grounds of appeal:

“1. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in admitting the delayed appeal by 131 days without adjudicating the delay by speaking order. In this case, penalty order was passed on 30.03.2019, served on 01.04.2019 and appeal filed on 08.09.2019.

2. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in cancelling the penalty of Rs.5,00,85,000/- levied u/s 271(1)(c) by the AO for furnishing inaccurate particulars of income deliberately, and completely ignored the fact that the disallowance of depreciation made in view of provision of Explanation 10 to Section 43(1) was confirmed during quantum appellate proceedings.

3. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in relying on the decision of the Hon’ble ITA T, Chandigarh in the case of M/s Lotus Integrated Taxpark Ltd. Vs. DCIT (ITA No.1138/Chd/2014 order dated 01.10.2015) and did not appreciate the fact that in the present case, the facts are different from the reported case. In the case of M/s Lotus Integrated Taxpark Ltd., grant was sanctioned for utilization against the project as a whole i.e. for development of textile park and was neither sanctioned nor disbursed for the specific assets individually whereas in the instant case, subsidy was granted to the assessee for specific project i.e. wind power project which directly related thereto.

4. The appellant craves to add, amend, alter, delete or modify the above grounds of appeal before or at the time of hearing.”

5. In this appeal, the Revenue’s main grievance is against cancelling the penalty of Rs. 5,00,85,000/- U/s 271(1)(c) of the Income Tax Act, 1961 (in short, the Act). At the outset, the ld CIT-DR has objected to the cancellation of penalty U/s 271(1)(c) of the Act has further submitted that the A.O. had passed assessment order by assessing assessee’s total income at Rs. 15,07,77,715/-. The A.O. also levied penalty U/s 271(1)(c) of the Act by observing that after making a careful consideration of the assessment proceedings, appellate proceedings and the reply of the assessee for show cause notice and found that the assessee has furnished inaccurate particulars of income and levied the penalty. The ld. CIT-DR has relied on the order of the A.O. as well as the penalty order.

6. On the contrary, the ld AR has reiterated the same arguments as were raised before the ld. CIT(A) and submitted that the ld. CIT(A) after verifying all the details of the matter had cancelled the penalty levied U/s 271(1)(c) of the Act by passing a speaking order. He has relied on the order of the ld. CIT(A).

7. We have heard the ld. Counsels of both the parties and have perused the material placed on record. We have also deliberated upon the decisions cited in the orders passed by the authorities below as well as cited before us and we have also gone through the orders passed by the revenue authorities. From the record, we noticed that during the year under consideration, the assessee company made addition on assets of Wind Power Project and claimed depreciation @ 80% U/s 32 of the Act. Apart from this, the assessee also received grant/subsidy amounting to Rs. 36.00 crores from Ministry of Testile, Government of India and was shown as “Subsidy Grant from Government” under the “Reserve & Surplus” in Schedule-2 of the balance sheet many not reduced from the cost of actual cost of assets for the purpose of computation of depreciation, in view of provisions of sec. 43(1), as the Grant/Subsidy was provided against the actual expenditure incurred towards the above group of assets and further the said show cause notice was also issued to the assessee on the ground as to why the depreciation of Wind Mill and its different components i.e. machinery wind mill, power evacuation infrastructure facilities, civil work construction of wind mill foundation, supply and installation of HT electrical yard and transmission line, lease of land and erection and installation work and commissioning may not be allowed at the rate of 80%, 15%, 10%, 15%, Nil and 15% respectively as against 80% depreciation claimed by the assessee on the wind mill project.

8. The assessee furnished detailed reply on both the points on 10-03-2014. Regarding reduction of grant/subsidy of Rs.36 crores from the cost of assets for the purpose of calculating deprecation, the assessee mainly contended that as per the SITP the Central Govt. has provided the financial aid/grant to develop textile sector and encourage entrepreneurs to move to particular area and provided contribution to develop world class infrastructure. As such the grant is received to develop particular area and not to meet out the cost of particular assets. Therefore, the amount of grant/subsidy is not to be reduced from the actual cost of assets for computing depreciation as provision of Sec.43(1) of the Act are not applicable to its case. Regarding calculation of depreciation on various components of windmill as per Appendix 1A it was contended that the depreciation on Wind Mill is allowable as a whole and not component wise, as all the components of the windmill are its part & parcel and have no separate use. The A.O. was not satisfied with the reply of the assessee and made additions. The said additions were challenged by the assessee before the ld. CIT(A), who dismissed the appeal of the assessee and thereafter the said additions were further challenged before the ITAT and the ITAT had given part relief to the assessee with regard to depreciation on Wind Mill, however, upheld the addition on the ground of subsidy received from the Government of India.

9. Thereafter penalty proceedings were initiated and penalty was levied and after issuing of show cause notice and seeking reply of the assessee, penalty was imposed by the A.O. On appeal, the ld. CIT(A) cancelled the penalty levied by the A.O. U/s 271(1)(c) of the Act.

10. We have meticulously gone through the entire facts of the case, now we are dealing with the question of imposition of penalty in the present case. From the record, we found that the A.O. had levied penalty u/s 271(1)(c) of the Act for furnishing inaccurate particulars of income simply on basis of assessment order, without giving any independent finding in the penalty order that how the assessee has furnished inaccurate particulars of its income, particularly when the assessee had duly disclosed the receipt of grant/subsidy of Rs.36.00 crores from the Govt. of India in its balance sheet and had also given all necessary details for claim of 80% depreciation on wind mill as a whole. Further, while imposing the penalty u/s 271(1)(c) for furnishing inaccurate particulars of income the AO has invoked Explanation-I to sec. 271(1) (c) of the Act. It is a settled legal position that Explanation-I to section 271(1) (c) cannot be applied if the charge is for filling inaccurate particulars. The deeming fiction is that the Explanation-I could be invoked only if there is concealment of income, without prejudice, to facts and circumstances of the case Explanation 1 to section 271(1) (c) could not be invoked for the following reasons:

(i) That the assessee has offered explanation to the AO at the time of assessment.

(ii) That the explanation so offered by the assessee has not been found to be false by the AO.

(iii) That the assessee in bonafide belief has filed all the details and records in respect of the additions made were placed before the AO.

In this regard the Coordinate Bench of the ITAT, Delhi Benches in the case of Tristar Intech(P) Ltd. V. ACIT, ITA No. 1457/Delhi/2010, dated 07-09-2015 has held as under-

“17. From the said provision, it is apparent that, if the ld.AO in the course of assessment proceedings is satisfied that, any person has concealed the particulars of income or furnished inaccurate 9 ITA No. 1457/De1/2010 particulars of such income, then he may levy penalty on the assessee. Thus, there are two different charges i.e. concealment of particulars of income or furnishing of inaccurate particulars of income. The penalty can be imposed only for a specific charge. Furnishing inaccurate particulars of income means, when the assessee has not disclosed the particulars correctly or the particulars disclosed by the assessee are found to be incorrect whereas, concealment of particulars of income means, when the assessee has concealed the income and has not shown the income in its return or in its books of accounts. Explanation 1 is a deeming provision and is applicable when an amount is added or disallowed in computation of total income which is deemed to represent the income in respect of which particulars have been concealed Explanation 1 cannot be applied in a case where the assessee furnishes inaccurate particulars of income. “

Similarly, the Coordinate Bench of ITAT Delhi Benches in the case of Lala Harbhagwar Dass Memorial & Dr. Prem Hospital (P.) Ltd, (2012) 23 taxmann.com 32 (Delhi ITAT) has held as under-

” 12. We have heard both the sides and gone through the facts of the case, relevant material and the decisions relied upon, on behalf of the assessee as well as by the department, as regards penalty levied in respect of amount of excess depreciation and interest on amount borrowed for building which was incomplete and find that not even a whisper has been made in the penalty order as to which specific particulars were furnished inaccurate or were concealed. The expression, ‘has concealed the particulars of income’ and ‘has furnished inaccurate particulars of income’ have not been defined either in sect ion 271 or elsewhere in the Act. However, notwithstanding the difference in the two circumstances, it is now well established that they lead to the same effect namely, keeping off a certain portion of the income from the return. According to Law Lexicon, the word “conceal” means:

“to hide or keep secret. The word ‘conceal ‘is con+celare which implies to hide. It means to hide or withdraw from observation; to cover or keep from sight; to prevent the discovery of; to withhold knowledge of. The offence of concealment is, thus, a direct attempt to hide an item of income or a portion thereof from the knowledge of the income-tax authorities.”

In Webster’s Dictionary, “inaccurate” has been defined as: “not accurate, not exact or correct; not according to truth; erroneous; as an inaccurate statement, copy or transcript.”

13. The penalty u/s 271(1)(c) of the Act is leviable if the AO is satisfied in the course of any proceedings under this Act that any person has concealed the particulars of his income or furnished inaccurate particulars of such income. It is settled position that assessment proceedings and penalty proceedings are separate and distinct and as held by Hon’ble Supreme Court in the case of Ananthraman Veerasinghaiah & Co. Vs. CIT, 123 ITR 457, the findings in the assessment proceedings cannot be regarded as conclusive for the purposes of the penalty proceedings. It is also well settled that the criterion and yardsticks for the purpose of imposing penalty u/s 271(1) (c) of the Act are different than those applied for making or confirming the additions. It is, therefore, necessary to re-appreciate and reconsider the matter so as to find out as to whether the addition or disallowance made in the quantum proceedings actually represents the concealment on the part of the assessee as envisaged in sec. 271(1)(c) of the Act, and whether it is aft case to impose the penalty by invoking the said provisions. The provisions of sect ion 271(1)(c) of the Act stipulate that if the Assessing Officer or the CIT(Appeals) or the Commissioner, in the course of proceedings under this Act, is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars thereof , he may direct that such person shall pay by way of penalty a sum which shall not be less than but which shall not exceed three times the amount of tax sought to be evaded by a reason of the concealment of particulars of his income. Explanation 1 to section 271(1)(c) of the Act mentions that where in respect of any facts material to the computation of the total income of any person under the Act, such person fails to offer an explanation or offers an explanation which is found by the AO or the CIT (Appeals) or the Commissioner to be false, or such I. person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then the amount added or disallowed in computing the total income of such person as a result thereof shall for the purpose of clause (c) of sect ion 271(1); be deemed to represent the income in respect of which particulars have been concealed. In other words, the necessary ingredients for attracting Explanation 1 to sect ion 271(1) (c) are that (i) the person fails to offer the explanation, or (ii) he offers the explanation which is found by the AO or the CIT (Appeals) or the Commissioner to be false, or (iii) the person offers explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same have been disclosed by him.

14. If the case of any assessee falls in any of these three categories, then the deeming provision provided in Explanation 1 to section 271(1) (c) come into play, and the amount added or disallowed in computing the total income shall be considered as the income in respect of which particulars have been concealed, for the purposes of clause (c) of section 271(1), and the penalty follows. On the other hand, if the assessee is able to offer an explanation, which is not found by the authorities to be false, and assessee has been able to prove that such explanation is bona fide and that all the facts relating to the same have been disclosed by him, the assessee shall be out of the clutches of explanation ion 1 to sect ion 271(1) (c) of the Act, and in that case, the penalty shall not be imposed In the instant case, the assessee discharged the onus cast on it in terms of explanation 1 to sec. 271(1) (c) of the Act. Hon’ble Supreme Court in the case of Dilip N. Shroff v. Jt CIT [2007] 210 CTR (SC) 228: [2007] 291 ITR 519 (SC) while considering the scope of these provisions u/s 271(1) ( c) of the Act observed in the following terms:

“The legal history of sect ion 271(1) (c) of the Act traced from the 1922 Act prima facie shows that the Explanations were applicable to both the parts. However, each case must be considered on its own facts. The role of the Explanation having regard to the principle of statutory interpretation must be borne in mind before interpreting the aforementioned provisions. Clause (c) of sub-sect ion (1) of section 271 categorically states that the penalty would be leviable if the assessee conceals the particulars of his income or furnishes inaccurate particulars thereof by reason of such concealment or furnishing of inaccurate particulars alone, the assessee does not ipso facto become liable for penalty. Imposition of penalty is not automatic. Levy of penalty is not only discretionary in nature but such discretion is required to be exercised on the part of the Assessing Officer keeping the relevant factors in mind Some of those factors apart from being inherent in the nature of penalty proceedings as has been noticed in some of the decisions of this court inhere on the face of the statutory provisions. Penalty proceedings are not to be initiated, as has been noticed by the Wanchoo, Committee, only to harass the assessee.The approach of the Assessing Officer in this behalf must be fair and objective……………………………………………….. The term “inaccurate particulars” is not defined Furnishing of an assessment of value of the property may not by itself be furnishing of inaccurate particulars. Even, if the Explanations are taken recourse to, a finding has to be arrived at having regard to clause (A) of Explanation 1 that the Assessing Officer is required to arrive at a finding that the explanation offered by an assessee, in the event he offers one, was false. He must be found to have failed to prove that such explanation is not only not bona fide but all the facts relating to the same and material to the income were not disclosed by him. Thus, apart from his explanation being not bona fide, it should have been found as of fact that he has not disclosed all the facts which was material to the computation of his income. “

15. In the light of aforesaid observations of the Hon’ble Apex Court, what is to be seen in the instant case, is whether the claim for deduction of excess depreciation and interest on amount borrowed for building which was incomplete, made by the assessee was bona-fide and whether at all the material facts relevant thereto have been furnished and once it is so established, the assessee cannot be held liable for concealment penalty u/s 271(1) (c) of the Act. The Assessing Officer has not been able to establish that the claim of the assessee for deduction of excess depreciation and interest on amount borrowed for building which was incomplete was not bona fide or that any specific particulars were concealed or furnished inaccurate. A mere reject ion of the claim of the assessee by relying on different interpretations does not amount to concealment of the particulars of income or furnishing inaccurate particulars thereof by the assessee. Hon’ble Apex Court in CIT v. Reliance Petroproducts (P) Ltd. [2010] 322 ITR 158, after considering various decisions including Dilip N. Shroff v. ft. CIT [2007] 291 ITR 519/ 161 Taxman 218 (SC) and Union of India v. Dharmendra Textile Processors [2008] 306 ITR 277 / 174 Taxman 571 (SC) concluded that a mere making of a claim, which is not sustainable in law, by itself will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars. In the case under consideration, there is nothing to suggest that the assessee furnished any inaccurate particulars or concealed the particulars. Admittedly, the claim for deduction of excess depreciation and interest on amount borrowed for building which was incomplete was there in the documents forwarded with the return. In this view of the matter, no fault can be found with the claim of the assessee that it had claimed the deduct ion in a bona fide manner.

16. In the case under consideration, as pointed out by the ld. AR of the assessee had given all the particulars of income and had disclosed all facts to the AO in relation to claim for deduction of excess depreciation and interest on amount borrowed for building which was incomplete. Mere disallowance of a claim will not amount to filing of inaccurate particulars of income. It can at best be a “wrong claim” not “a false claim”. In such circumstances, Hon’ble Delhi High Court held in the case of Commissioner of Income-Tax vs Bacardi Martini India Limited,288 ITR 585 (Del) that no penalty was leviable. In CIT vs. Harshvardhan Chemicals & Minerals Ltd (259 ITR 212) (Raj), Hon’ble Rajasthan High Court upheld the finding of the Tribunal that when the assessee has claimed some amount though that is debatable, in such cases, it cannot be said that the assessee has concealed any income or furnished inaccurate particulars for evasion of the tax. Recently, Hon’ble Apex Court in Reliance Petro Products(supra) held that a mere making of the claim, which is not sustainable in law, by itself will not amount to furnishing inaccurate particulars regarding the income of the assessee. Thus, merely because the assessee had claimed the expenditure in relation to exempt income, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, attract the penalty u/s 271(1)(c) of the Act. In the present case, we are of the opinion that the disallowance of claim for deductions of excess depreciation and interest on amount borrowed for building which was incomplete, cannot be considered as concealment of income or furnishing inaccurate particulars thereof especially when all the relevant particulars ITA. No.5023/Del./2011 (A. Y.: 2005-06) 16 were disclosed before the AO. The following observations made by the Hon’ble Apex Court in the aforesaid case of M/s Reliance Petro Products (supra) are relevant: “

It was tried to be suggested that Section 14A of the Act specifically excluded the deductions in respect of the expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. It was further pointed out that the dividends from the shares did not form the part of the total income. It was, therefore, reiterated before us that the Assessing officer had correctly reached the conclusion that since the assessee had claimed excessive deductions knowing that they are incorrect; it amounted to concealment of income. It was tried to be argued that the falsehood in accounts can take either of the two forms; (i) an item of receipt may be suppressed fraudulently; (ii) an item of expenditure may be falsely (or in an aggregated amount) claimed, and both types attempt to reduce the taxable income and, therefore, both types amount to concealment of particulars of one’s income as well as furnishing of inaccurate particulars of income. We do not agree, as the assessee had furnished all the details of its expenditure as well as income in its Return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the Return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under Section 271(1)(c). If we accept the contention of the Revenue then in case of very Return where the claim made is not accepted by Assessing Officer for any reason, the assessee will invite penalty under Section 271(1) (c). That is clearly not the intendment of the Legislature.

11. In this behalf the observations of this Court made in Sree Krishna Electrical v. State of Tamil Nadu & Anr. [(2009) 23VST 249 (SC)] as regards the penalty are apposite. In the aforementioned decision which pertained to the penalty proceedings in Tamil Nadu General Sales Tax Act, the Court had found that the authorities below had found that there were some incorrect statements made in the Return. However, the said transactions were reflected in the accounts of the assessee. This Court, therefore, observed:

“So far as the question of penalty is concerned the items which were not included in the turnover were found incorporated in the appellant’s account books. Where certain items which are not included in the turnover are disclosed in the dealer’s own account books and the assessing authorities include these Iitems in the dealer’s turnover disallowing the exemption, penalty cannot be imposed. The penalty levied stands set aside.” The situation in the present case is still better as no fault has been found with the particulars submitted by the assessee in its Return.”

17. In view of the foregoing, we are of the opinion that mere erroneous claim in the absence of any concealment or furnishing of inaccurate particulars, is no ground for levying penalty, especially when there is nothing on record to show that the explanation offered by the assessee was not bona fide or any material particulars were concealed or furnished inaccurate. In these circumstances, we have no hesitation in observing that no penalty is exigible in relation to claim for deduction of excess depreciation and interest on amount borrowed for building which was incomplete. Therefore, we hold that penalty is not imposable in this case and action of authorities below in imposing/confirming the penalty u/s 271(1)(c) of the Act is neither proper nor justified. As such, while accepting the plea of the assessee, we direct to delete the impugned penalty imposed/confirmed. 18. Ins view of discussion as held above and in the light of fact.”

The Coordinate Bench of ITAT, Jaipur Benches in the case of ITO V. M/s Vaidangi Techno Management consultants (P) Ltd., ITA No. 1078/JP/2016 decision dated 11-07-2017 after considering a number of judgements on the subject has held as under-

“6. We have heard the rival contentions, perused the material available on record There is no dispute with regard to the position, that the assessment proceedings and penalty proceedings are two different and distinct proceedings. If the assessee is having any plausible explanation with regard to the default and the Act of the assessee is bonafide. In that event the penalty cannot be levied. It is the contention of the assessee that in the present case the assessee under a bonafide belief that UID Kit being a part of computer, therefore, it claimed depreciation at 60%. Ld. CIT (A) deleted the penalty finding that the claim was bonafide in view of the judicial pronouncements as relied in our consider view, there is not infirmity into the order of the Ld. CIT(A) when it is established that the claim was made under the bonafide belief hence, there was no reason to impose penalty. This ground the Revenue’s appeal is dismissed. “

11. The Hon’ble Rajasthan High Court in various cases allowed depreciation relating to windmill and the some are as under:

(i) V.K.K. Enterprises (2014) 51 taxmann.com 190

(ii) CIT V. Mehru Electricals & Mechanical Engineers (P) Ltd, (2016) 388 ITR 169 and

(iii) Pr. CIT V. M/s Gangaur Exports (P) Ltd DB ITA No. 14/2017/ dated 22-05-2017 has consistently held that depreciation is to be allowed as the rate of 80% for whole windmill and it has not to be allowed component wise as per Appendix IA.

This issue is settled in favour of the assessee and is not even debatable in view of the decision of Hon’ble Supreme Court in the case of CIT V. Raghuvir Synthetics ltd, Civil Appeal No. 2315/2007, date 28­-03-2017.

12. Various courts have consistently held that once all the information is given in the return of income accompanied by relevant books maintained by assessee, simple disallowance of depreciation will not amount to furnishing inaccurate particulars, as held by Hon’ble Punjab & Haryana High Court in the case of CIT V. Ajaib Singh & Co., 253 ITR 630 and other several decisions including CIT V. Reliance Petroproducts (P) Ltd., 322 ITR 158(SC).

13. From the facts, we have noticed that in the balance sheet dated 31.03.2011, relevant to year under consideration, the total grant/ subsidy of Rs. 36.00 crores received by the assessee was shown as subsidy/grant from government under the head “Reserve and Surplus” in Schedule II of the Balance Sheet. The AO while completing the assessment u/s 143(3) of the Act, reduced the grant/subsidy of Rs. 36.00 crores from the cost of assets holding that proviso to Explanation 10 of Section 43(1) was applicable to the assessee as far as the subsidy/ grant of Rs. 36.00 crores received by the assessee from Ministry of Textile, Government of India is concerned. Further, the AO held that depreciation at 80% was admissible only for machinery of windmill and depreciation was admissible at different rates for different components as per Appendix 1A of Rule 5. In the result, the AO after considering the proportionate amount of grant/ subsidy under each head and proportionate amount of capital expenses, worked out the admissible depreciation at Rs. 3,21,03,619/- as against the claim of depreciation of Rs. 18,28,81,334/- made by the assessee and the excess claim of depreciation of Rs. 15,07,77,715/- (Rs.18,28,81,334 – Rs.3,21,03,619) was disallowed.

14. The specific contention of the assessee with regard to applicability of proviso to Explanation 10 of Section 43(1) to subsidy/grant of Rs. 36.00 crores received from the Ministry of Textile, Govt. of India is concerned, according to assessee, the issue is covered in favour of by the decision of Coordinate Bench of ITAT Chandigarh in the case of M/s Lotus Integrated Taxpark Ltd. Vs DCIT ITA No. 1138/Chd/2014 order dated 01/10/2015 and as far as issue of admissibility of depreciation at 80% as a whole on the Wing Mill and not on component wise was also covered and therefore, the assessee had got relief on this point.

15. After having gone through the decisions as well as facts of the present case, we are of the view that that assessee had disclosed complete particulars of subsidy of Rs. 36.00 crores and the respective depreciation at 80% was claimed on the entire addition to Wind Mill without reducing the amount of subsidy of Rs. 36.00 crores from the cost claimed on the basis of various decisions of the Coordinate Benches of the ITAT and the Hon’ble High Court, the assessee has neither concealed any particulars of income nor it had filed any inaccurate particulars of income. All the information was available in the Balance Sheet of the assessee. Therefore, according to the assessee, no penalty u/s 271(1)(c) can be levied in respect of the disallowance of depreciation of Rs. 15,07,77,715/- (Rs.18,28,81,334 — Rs.3,21,03,619) made by the AO. In support of its contention that no penalty u/s 271(1)(c) can be levied in respect of disallowance of depreciation made by the AO, the assessee has relied upon following decisions:

“(1) Prafful industries (P) Ltd. V. DCIT, ITA No. 4023/Del/2016 dated 15-032018, ITAT-Delhi

(2) M/s N.L. Engineering (P) Ltd. V. DCIT, ITA No. 1340/CHD/2012, dated 1709-2014, ITAT-Chandigarh.

(3) Uttraanchal Jal Vidyut Nigam Ltd. V. DCIT, ITA No. 3650/Del/2012, Dated-11-02-2016, ITAT-Delhi.

(4) DCIT V. M/s Federal brands Ltd. ITA No. 741/Mum/2016, dated 06-042018, ITAT-Mumbai.

(5) DCIT V. Gujarat State Forest Dev. Corp. Ltd., ITA NO. 3294/Ahd/2009, 17-06-2011, ITAT-Ahmedabad.

(6) ITO V. Twinkle Techplast (P) Ltd, ITA No. 2208, 2209/Ahd/ 2012, dated 07-12-2012, ITAT- Ahmedabad.”

16. We have gone through the various decisions relied upon by the assessee carefully. The relevant portion of decision relied upon by the assessee are reproduced hereunder:

(1) Prafful industries (P) Ltd. vs. DCIT (ITA No. 4023/Del/2016) :

“7. We have considered the rival submissions of the parties and have gone through the entire material available on record including the case laws relied by the assessee. It is not in dispute that the assessee has declared the total value offixed assets (Plants & Machinery) in its books of accounts. It is also not in dispute that the capital subsidy received by the assessee under TUFF scheme of Gujrat Government was also declared by the assessee before the AO in the assessment proceedings. The only lapse on the part of the assessee unearthed by the AO in the assessment proceedings was that instead of deducting the cost offixed assets by the amount of capital subsidy received from the Govt., the assessee had shown it as part of reserves in the balance sheet and for this lapse, the AO had already disallowed the excess depreciation claimed. These facts, however, nowhere go to suggest that the assessee had furnished the inaccurate particulars to attract penalty zils. 271(1)(c) of the Act. Had the assessee not declared the capital subsidy received and claimed the depreciation on full value of capital assets, the matter would have been different. However, once all the information were given in the return of income accompanied by relevant books maintained by assessee, in our considered opinion, simple disallowance of depreciation will not amount to furnishing of inaccurate particulars, as held by Hon’ble Punjab & Haryana High court in the case of CIT vs. Ajaib Singh & Co., 253 ITR 630 and other several decisions relied by the assessee before us including CIT vs. Reliance Petroproducts Pvt. Ltd., 322 ITR 158 (SC). In view of this, we are not inclined to sustain the order of the ld. CIT(A). As a result, the appeal of the assessee is found to have merit and deserves to be allowed.”

(2) N.L. Engineering Pvt. Ltd. vs DCIT (ITA No. 1340/Chd/2012) :

“13. Admittedly the assessee was in receipt of capital subsidy which had to be adjusted against the cost of assets purchased during the year and the depreciation on such assets had to be allowed on reduced value. The assessee had declared the complete information in respect of the said transaction in the return of income. However, under bonafide impression, the depreciation on assets had been claimed at a higher value but that itself would not establish that the assessee had furnished inaccurate particulars of income. The claim made by the assessee was bonafide. Where the assessee had submitted complete information and merely because the claim of depreciation had been made on a higher figure, does not make the assessee exigible to levy of penalty under section 271(1)(c) of the Act.

13. In the totality of the facts and circumstances, we find no merit in the order of Commissioner of Income Tax (Appeals) in levying the penalty for concealment under section 271(1)(c) of the Act. Accordingly, we direct the Assessing Officer to delete the same. The grounds of appeal raised by the assessee are allowed.”

(3) Uttaranchal Jal Vidyut Nigam Limited vs DCIT (ITA No. 3650/De1/2012):

“9. Admittedly in the case before us, the assessee was in receipt of capital subsidy which had to be adjusted against the cost of assets purchased during the year and the depreciation on such assets had to be allowed on reduced value. The assessee had declared the complete information in respect of the said transaction in the return of income. However, under bona fide impression, the depreciation on assets had been claimed at a higher value but that itself would not establish that the assessee had furnished ITA. No. 3650/Del/2012 Assessment year 2005-06 inaccurate particulars of income. The claim made by the assessee was bona fide. Where the assessee had submitted complete information and merely because the claim of depreciation had been made on a higher figure, does not make the assessee exigible to levy of penalty under section 271(1 )(c) of the Act.

10. In the totality of the facts and circumstances, we find no merit in the order of Commissioner of Income Tax (Appeals) in confirming the penalty for concealment under section 271(1)(c) of the Act. Accordingly, we direct the Assessing Officer to delete the same. The grounds of appeal raised by the assessee are allowed.”

(4) Gujarat State Forest Development Corporation Ltd. vs DCIT (ITA No. 3294/Ahd/2009)

“From the above it is evident that Their Lordships have clearly laid down that merely an incorrect claim was made by the assessee, it would not tantamount to furnishing of inaccurate particulars so as to make the assessee liable for penalty under Section 271(1)(c). In the present, there is no dispute that all the facts have been disclosed by the assessee during the assessment proceedings, and the only dispute is with regard to claim of depreciation. While calculating the depreciation the assessee has Laken one view and the department has taken another view. This will not amount to concealment of income or furnishing of the inaccurate particulars. It is settled proposition of the law that a misconceived or wrong claim for deduction or exemption does not automatically attract penalty under Section 271(1)(c). Therefore, in such situation no penalty can be levied under section 271(1)(c). In view of the above, we respectfully following the decision of the Hon’ble Apex Court in the case of Reliance Petroproducts Ltd. (supra) uphold the order of the CIT(A) on this issue and dismiss the appeal of the Revenue.”

(5) Twinkle Techplast Pvt. Ltd. vs ITO, Ward-8(1), Ahmedabad (ITA No. 2208/Ahd/2012, A.Y. 2005-06), (ITA No. 2209/Ahd/2012, A.Y. 2008-09):

“5. Having heard the submissions of both the sides, we are of the view that the issue about the nature of the subsidy had always been a subject matter of controversy. However, in the present case the assessee had admitted that the nature of the subsidy was “capital receipt”, therefore required to be reduced from the cost of the asset. The only plea of the assessee was that as soon as the legal position was clear to the assessee about the nature of the subsidy, the claim of depreciation was modified suo motu. Otherwise also, the relevant information in respect of the subsidy amount received by the assessee had duly been disclosed in the books of accounts of the assessee. Therefore, the Hon’ble Courts in such circumstances have held that one of the facts are duly been disclosed by the assessee and those facts have not been found to be false or fabricated, then merely because of difference of opinion about the claim of depreciation, the assessee is not required to be penalized ITA Nos.2208 & 2209/Ahd/2012 ITO vs. Twinkle Techplast Pvt Ltd. AYs – 2005-06 & b2008-09 (respectively) u/s.271(1)(c) of IT Act. Resultantly, we hereby affirm the findings of the ld.CIT(A) and dismiss the ground of the Revenue for both the years.”

Since the assessee has disclosed entire facts in the Balance Sheet with regard to the subsidy of Rs. 36.00 crores received by it and the depreciation at 80% on the entire windmill as a whole has been claimed on the basis of various decisions of Hon’ble Rajasthan High Court and the subsidy of Rs. 36.00 crores received by the assessee from Ministry of Textile, Government of India was not reduced from the cost of the windmill, as according to the assessee, the Proviso to Explanation 10 of Section 43(1) was not applicable in the case of assessee placing reliance on M/s Lotus Integrated Taxpark Ltd. vs DCIT (supra). Although, in assessee’s case on merits the Coordinate bench has sustained the addition but as far as imposition of penalty, principles are altogether different. In penalty proceedings, we have to consider full and complete disclosure of all facts and figures and in case, the assessee had made disclosure of all facts and figures then in that eventuality no penalty is leviable U/s 271(1)(c) of the Act. Therefore, in view of various decisions discussed above, we are of the considered view that no penalty u/s 271(1)(c) can be levied upon the assessee in respect of the disallowance of depreciation of Rs. 15,07,77,715/- made by the AO. in view of the above facts and circumstances of the case, we do not find any reason to interfere in the order of the ld. CIT(A), accordingly, we uphold the same.

17. In the result, this appeal of the revenue is dismissed.

18. Now we take Revenue’s appeals No. 1338/JP/2019 and 1339/JP/2019 for the A.Y. 2012-13 and 2013-14 respectively.

In both these appeals, since the facts and submissions are identical to the facts and submissions of ITA No. 1337/JP/2019, therefore, our findings given in ITA No. 1337/JP/2019 shall apply mutatis mutandis in these appeals also.

19. In the result, all these three appeals of the revenue are dismissed.

Order pronounced in the open court on 22nd December, 2020.

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