9911796707
|
Home
Issues Involved:
1. Justification of penalty under section 271(1)(c) of the Income-tax Act, 1961. 2. Disallowance of depreciation on aircraft. 3. Disallowance of deduction under section 35D for amortization of preliminary expenses. Detailed Analysis: 1. Justification of Penalty under Section 271(1)(c) of the Income-tax Act, 1961: The core issue was whether the penalty of Rs. 13,56,000 imposed on the assessee under section 271(1)(c) was justified. The penalty was based on the disallowance of depreciation on an aircraft and the disallowance of a deduction under section 35D. The Assessing Officer (AO) argued that the assessee willfully furnished incorrect particulars, thus concealing income. However, the Tribunal found this approach erroneous and unsustainable in law. It emphasized that the explanation provided by the assessee must be objectively considered and that the Revenue must demonstrate that the assessee's behavior was unjustified based on reasonable human probabilities. 2. Disallowance of Depreciation on Aircraft: The AO disallowed the depreciation claim on the aircraft, arguing that the lease was an operational lease rather than a financial lease, meaning the aircraft always belonged to the lessor. The assessee contended that the lease was a de facto finance arrangement, entitling them to depreciation. The Tribunal found the assessee's explanation plausible, noting that the lease agreement could be viewed as a hire-purchase arrangement, which would entitle the assessee to depreciation. The Tribunal highlighted that the assessee's claim was not without basis and could not be outrightly dismissed as mala fide. 3. Disallowance of Deduction under Section 35D for Amortization of Preliminary Expenses: The AO also disallowed the deduction under section 35D, arguing that the aircraft could not be shown as an asset, thus its inclusion in the capital employed was erroneous. The Tribunal noted that if the aircraft was considered part of the assets, the claim for its inclusion in the capital employed could not be dismissed. The Tribunal concluded that the claims made by the assessee were prima facie acceptable and could not be reasons enough for imposing a penalty. Conclusion: The Tribunal held that the imposition of penalty under section 271(1)(c) was not warranted. It emphasized that the claims made by the assessee, although disallowed, were not without basis and could not be dismissed as unacceptable at the threshold. The Tribunal also noted that both the assessed income and the returned income were negative figures, further supporting the non-imposition of the penalty. The appeal was allowed, and the penalty under section 271(1)(c) was deleted.
|
