TMI Blog2012 (5) TMI 116X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. The facts are that during the assessment proceedings, the A.O. noted that the assessee claimed depreciation @ 4O% on the block of assets of life saving equipment which included on addition of Rs.55 lakhs. The assessee furnished two bills in respect of addition of R.55 lakhs, viz., a bill of purchase of CT Scanner System for Rs.51,07,704/-and another bill in lieu of lead glass/UPS/stabilizer for Rs. 3,92, 296/-. Both the bills were dated 29.3.2005 and of M/s VIPRO GE Medical System Ltd., Hosur, Karnatka totaling to Rs.55 lakhs. On perusal of the depreciation table relevant to the assessment year 2005-06 provided in the appendix of Income Tax Rules 1962, it was noted that in the block of plant and machinery at S.No. 3(xia), among the list of life savings medical equipment eligible for depreciation @ 40%, the name of CT Scan Machine is not mentioned. The AO, therefore, held that CT Scanner machine purchased during the year is not eligible for depreciation @ 40% under the block of life saving medical equipment. The assessee did not offer any explanation in this regard and submitted that depreciation @ 40% was claimed under the bonafide belief that it is covered under 'lifesaving m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contractor did not submit the bills before finalization of the balance-sheet. The assessee further claimed that the building was put to use during the year. It is further submitted that no depreciation was claimed since the cost of construction of the building was not transferred to the 'building account' during the year under consideration. The appellant also submitted that penalty u/s 271(1)(c) is not leviable since it has offered an explanation and has substantiated it and proved that its explanation was bonafide and all the facts relating to the same and material to the computation of the total income have been disclosed by it and referred to some decisions. 5. The submissions of the assessee were considered by the A.O. but was not found tenable for the reasons discussed in para.4 and 4.1of his order, which are reproduced below in which the Assessing Officer held the assessee is liable for penalty u/s 271(1)(c) of the Act for concealment of income and for furnishing inaccurate particulars of its income. The submissions of the assessee have been duly considered but not found tenable as the assessee has claimed depreciation of New Scan machine@ 4O% on the block of assets o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssets of Life Saving Medical Equipments which include Purchase of CT Scanner System (HI Speed FX/I) amounting Rs.51,01,704 and Purchase of Lead Glass/ UPS/ Stabilizer for Rs.3,92,296/-. In Quantum Proceedings, AD made the addition for charging higher rate of Depreciation @ 40% instead of 25% being the above said items are not 'under the list of Life Saving Medical Equipments copy of AO quantum Order dt: 31.8.2007 is at: Pg.29 37 where as per assessee the depreciation @ 40%was charged for the reason that Life Saving Medical Equipments include at Point (i) Magnetic Resonance imaging system (MRI) on which 40% Depreciation. has to be charged as per Income Tax Act. Both MRI and CT Scanner are Diagnostic Tools to Non-Invasively (non-surgically) look inside the body. Both have same functions but are used for and for different purposes. The Depredation Chart as per Income Tax Act and Note on CT Scan MRI functions at Pg.49-56.Being purely Medico-technical terms and considering the same functions, assessee treated the CT Scanner as Life Savings Medical, Equipment like MRI and charged depreciation rate @ 40% whereas 14. AO has gone by exact phraseology in Depreciation Chart. b) As regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e impugned year is at Pg.19-.28. In next assessment year the said advance to contractor has been transferred to Building A/c and Depreciation has been charged. (b) Further as submitted in quantum proceedings that the said building was complete and used for the purpose of business during the year only. Classes were held in the said building and survey party conducted survey of the said building on 29.11.2004 for 8 long hours and found the user of the building themselves in person. statement of the reasons present at the said school building were recorded. The facts can be verified from the survey [older of the revenue department and Affidavit of Director is at Pg. 58. The user of the building is evident by this fact that the earlier building being used for classes was on rent for Rs. 6,500/- per month till Sept. 2004 which was discontinued when own building was ready for use. The said fact confirms that old building was no longer in use and new building was used for business purposes. Even the bus was purchased for the purpose of transporting and ferrying the students to the new building, copy of receipt for purchase of Bus is at Pg. 57. The user of the said building is further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claiming interest on building loan taken for the building which was under construction and was not put to use during the year under consideration and hence, is liable for penalty u/s 271(1)(c) of the Act. The penalty levied by the Assessing Officer is, therefore, confirmed. 8. Still aggrieved, assessee has come up in further appeal and while reiterating the submissions as made before lower authorities, it was pleaded for deletion of the impugned penalty as imposed by the Assessing Officer and confirmed by the CIT(A). Since the claim of depreciation at higher rate was bona fide action on the part of the assessee because CT scan is also in a way Life Savings Equipment and so far as interest on capital investment in incomplete building which has been used as class rooms. So, claim of the assessee with respect to both the items is bona fide one, hence, penalty is not attracted. Reliance was heavily placed on decision of Gujarat High Court in the case of National Textiles vs. CIT, 249 I.T.R. 125 , the Hon ble Supreme Court judgement in the case of CIT vs. Reliance Petroproducts Pvt. Ltd., 322 I.T.R. 158 and Hon ble Punjab Haryana High Court in the case of CIT vs. Siddhartha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o ferry the students to their class rooms and these all factors do support the case of the assessee, under the bona fide impression, the claim with respect to both the items was made in the return of income. Therefore, there is no occasion for imposing the penalty. It was also submitted that CIT(A) has confirmed the penalty at old amount whereas assessee has categorically submitted in writing that penalty imposed has been partially reduced by the Assessing Officer himself on the basis of relief allowed and it clearly shows that CIT(A) has not applied his mind properly. Since penalty is not exigible in this case, therefore, same should be deleted which may be deleted. 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 'h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich 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 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 section 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 section 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been noticed in some of the decisions of this court, inheres 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld 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 particu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 items 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 depre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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