Gujarat High Court
Director Of Income Tax (International ... vs Niko Resources Ltd on 13 November, 2025
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
NEUTRAL CITATION
C/TAXAP/2256/2010 CAV JUDGMENT DATED: 13/11/2025
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Reserved On : 15/10/2025
Pronounced On : 13/11/2025
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/TAX APPEAL NO. 2256 of 2010
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR. JUSTICE PRANAV TRIVEDI
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Approved for Reporting Yes No
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DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)
Versus
NIKO RESOURCES LTD
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Appearance:
MR.VARUN K.PATEL(3802) for the Appellant(s) No. 1
MS VINISHA JAIN FOR M/S WADIAGHANDY AND CO(5679) for the
Opponent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR. JUSTICE PRANAV TRIVEDI
CAV JUDGMENT
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
1. Heard learned Senior Standing Counsel Mr. Varun K. Patel for the appellant and Page 1 of 11 Uploaded by RAGHUNATH R NAIR(HC00196) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 22:10:29 IST 2025 NEUTRAL CITATION C/TAXAP/2256/2010 CAV JUDGMENT DATED: 13/11/2025 undefined learned advocate Ms. Vinisha Jain for M/s. Wadia Ghandy and Co. for the respondent.
2. This Tax Appeal is filed by the Revenue under section 260A of the Income Tax Act, 1961 (For short "the Act") arising out of order dated 30.04.2010 passed by the Income Tax Appellate Tribunal, Ahmedabad, Bench-D, (For short "the Tribunal") in ITA No.2475/Ahd/2008 for Assessment Year 2000-2001.
3. This Court has admitted the appeal vide order dated 11.06.2012 for consideration of the following substantial question of law:
"Whether the Appellate Tribunal is right in law and on facts in correctly appreciating the facts on record and law so as to cancel the penalty levied under section 271(1)(c) of the Act ?"Page 2 of 11 Uploaded by RAGHUNATH R NAIR(HC00196) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 22:10:29 IST 2025
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4. Brief facts of the case are that the assessee company which is incorporated in Canada is engaged in the business of natural gas and oil exploration.
5. The assessee company entered into a joint venture with the Gujarat State Petroleum Corporation Ltd. (GSPCL) for the exploration and development of natural gas and oil fields located in India. The joint venture resulted in entering into production sharing contracts with the Government of India on 23.09.1994 for exploration and development of five designated natural gas and oil fields in Gujarat. The Company was permitted to set up a project office in India with effect from 14.08.1994.
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6. The assessee company filed its return of income for the year under consideration on 27.11.2000 declaring income of Rs.1,37,99,468/-. Since the total income computed under normal provisions of the Act fell short of 30% of the book profit, the book profit was computed at Rs. 2,25,77,576/- under section 115JA of the Act. The Assessing Officer framed the assessment under section 143(3) of the Act vide order dated 26.02.2003 determining income of Rs.1,47,26,220/-. The Assessing Officer also computed 30% of book profit under section 115JA at Rs. 2,25,77,576/-. Since 30% of book profit was more, the Assessing Officer framed the assessment under section 115JA at 30% of book profit at Rs.2,25,77,576/-. Thereafter the Assessing officer framed the assessment Page 4 of 11 Uploaded by RAGHUNATH R NAIR(HC00196) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 22:10:29 IST 2025 NEUTRAL CITATION C/TAXAP/2256/2010 CAV JUDGMENT DATED: 13/11/2025 undefined under section 147 read with section 143(3) of the Act wherein he assessed the total income at Rs.5,60,05,517/-. In the assessment order, the Assessing officer disallowed the expenditure incurred on exploration and drilling activities amounting to Rs.4,58,84,791/- claimed under section 42 of the Act and disallowed excessive depreciation on land based frilling platform by allowing it at 10% instead of 25%. The Assessing Officer also levied the penalty under section 271(1)(c) of the Act amounting to Rs.5,64,53,064/-.
7. The CIT(Appeals) in the appeal preferred by the assessee confirmed the penalty levied by the Assessing Officer. Being aggrieved, the assessee preferred appeal before the Tribunal. Page 5 of 11 Uploaded by RAGHUNATH R NAIR(HC00196) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 22:10:29 IST 2025
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8. The Tribunal deleted the penalty by the impugned order observing as under:
"7. Having heard both the sides, we have carefully gone through the orders of authorities below. Recently. The Hon'ble Supreme Court in the case of CIT -vs.- Reliance Petroproducts Pvt. Ltd. [2010] 322 ITR 158 (SC) held that making incorrect claim does not amount to concealment of "particulars of income." The head-notes of the said decision reads as under:-
A glance at the provisions of section 271 (1) (c) of the Income Tax Act, 1961, suggests that in order to be covered by it, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars Of his income. The meaning of the word "used in section 271 (1) (c) would embrace the detail of the claim made. Where no information given in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars In order to expose the assessee to penalty, unless the case is strictly Page 6 of 11 Uploaded by RAGHUNATH R NAIR(HC00196) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 22:10:29 IST 2025 NEUTRAL CITATION C/TAXAP/2256/2010 CAV JUDGMENT DATED: 13/11/2025 undefined covered by the provision, the penalty provision cannot be invoked. By no stretch of imagination can making an incorrect claim tantamount to furnishing inaccurate particulars. There cn be no dispute that everything would depend upon the return field by the assessee, because that is the only document where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. To attract penalty, the details supplied in the return must not be accurate, not exact or correct, not according to the truth or erroneous.
Where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271 (1)
(c). 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.
Decision of the Gujarat High Court affirmed."
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8. It is true in quantum proceeding, disallowance of expenditure claimed under section 42 as well as disallowance of excess depreciation on land based drilling platform is confirmed right up to Tribunal. In the original assessment framed by the Assessing Officer under section 143 (3) on 26.02.2003, both the claims of the assessee we allowed. This, in our opinion, is suffice to hold that the judgment of the Hon'ble Supreme Court in the case of CIT- vs.- Reliance Petroproducts Pvt. Ltd. (Supra) is squarely applicable to the fact of assessee's case. The appeal of the assessee against non-allowance of claim under section 42 of the I.T. Act has been admitted by the Hon'ble Gujarat High Court under section 260 A of the Income Tax Act. 1961. Whether land based drilling platform is to be treated as part and parcel of plant and machinery or not is a debatable issue. Admittedly, the case of the assessee does not fall within the mischief of main provision of section 271 (1) (c) of the Income Tax Act, 1961 because mere rejection of assessee's claim would not be sufficient to hold the assessee to be guilty of concealment. The Hon'ble Gujarat High Court in the case of Sarabhai Chemical (P) Ltd [2002]257 ITR 355 (Guj) held as under:-
"The deeming fiction that the added/disallowed amounts represent Page 8 of 11 Uploaded by RAGHUNATH R NAIR(HC00196) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 22:10:29 IST 2025 NEUTRAL CITATION C/TAXAP/2256/2010 CAV JUDGMENT DATED: 13/11/2025 undefined the income in respect of which particulars have been concealed contained in Explanation I will not apply if the explanation that was given by the assessee in the quantum proceedings which he could not substantiat3 in those proceedings was (i) bona fide and
(ii) if he had disclosed all the facts relating to the same and material to the computation of his total income. In cases where explanation was offered, but was rejected as it could not be substantiated by the assessee, there would arise no presumption of concealment of the particulars of income that was added or disallowed and such assessee can show that the said explanation offered by him was a bona fide one and that he had disclosed all facts relating to such explanation and material to the computation of his total income during the quantum proceeding."
9. In the present case, the assessee has disclosed all the material facts. It is not only bona fide but the assess has also substantiated the same by the fact that in original assessment, deduction under section 42 as well as depreciation claim was allowed. Moreover, the appeal of assessee on disallowance claimed under section 42 of Rs.4,58,84,791/- is Page 9 of 11 Uploaded by RAGHUNATH R NAIR(HC00196) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 22:10:29 IST 2025 NEUTRAL CITATION C/TAXAP/2256/2010 CAV JUDGMENT DATED: 13/11/2025 undefined admitted by the Hon'ble Gujarat High Court under section 260A. In this view of the matter, in our opinion, it is not a fit case to levy the penalty under section 271(1) (c). Therefore, penalty confirmed by the Learned Commissioner of Income Tax (Appeals) in respect of both the items of additions/ disallowances is hereby deleted."
9. The Tribunal after considering the decision of Hon'ble Apex Court in case of Reliance Petroproducts Pvt. Ltd (supra) has rightly come to the conclusion that no penalty could have been levied upon the appellant in absence of any finding that any details supplied by the appellant in the return were found to be incorrect, erroneous or false. Similarly so far as the claim of depreciation on land based drilling platform is concerned, this Court in case of Niko Resources Ltd. reported in (2017) 88 taxmann.com 691 (Gujarat) Page 10 of 11 Uploaded by RAGHUNATH R NAIR(HC00196) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 22:10:29 IST 2025 NEUTRAL CITATION C/TAXAP/2256/2010 CAV JUDGMENT DATED: 13/11/2025 undefined has held that mineral oil wells is to be treated as plant and not building and therefore, in view of such facts also the Tribunal has rightly deleted the penalty levied upon the appellant assessee.
10. We therefore, answer the question of law in favour of the assessee and against the Revenue. Appeal is accordingly dismissed.
(BHARGAV D. KARIA, J) (PRANAV TRIVEDI,J) RAGHUNATH R NAIR Page 11 of 11 Uploaded by RAGHUNATH R NAIR(HC00196) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 22:10:29 IST 2025