2012 (3) TMI 481 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of penalty imposed u/s 271(1)(c) for excess depreciation claimed by the assessee.
2. Confirmation of penalty u/s 271(1)(c) for addition made on account of alleged fund transfer from M/s R.K. Video Distributor.

Summary:

Issue 1: Deletion of Penalty for Excess Depreciation
The Revenue appealed against the CIT(A)'s decision to delete the penalty imposed u/s 271(1)(c) for excess depreciation claimed by the assessee. The AO had imposed a penalty of Rs. 62,77,400/- for furnishing inaccurate particulars of income, specifically for claiming 100% depreciation on a Solvent Recovery Plant, which the AO argued was eligible only for 25% depreciation. The CIT(A) deleted the penalty, stating that the assessee had not concealed any income and that the difference in depreciation rates was a matter of opinion. The Tribunal upheld the CIT(A)'s decision, noting that the assessee was assessed at a loss of about Rs. 58 crores and had no immediate tax advantage from the higher depreciation claim. The Tribunal cited the Delhi High Court's judgment in Brahamputra Consortium Ltd. and the Supreme Court's judgment in Reliance Petro Products Pvt. Ltd., concluding that the claim did not amount to furnishing inaccurate particulars.

Issue 2: Confirmation of Penalty for Fund Transfer
The assessee's cross-objection challenged the CIT(A)'s confirmation of penalty u/s 271(1)(c) for an addition of Rs. 2,25,088/- made on account of an alleged fund transfer from M/s R.K. Video Distributor. The CIT(A) had confirmed the penalty, stating that the transaction was held as bogus and the assessee did not appeal against this finding. The Tribunal, however, deleted the penalty, noting that M/s R.K. Video Distributor was a genuine selling agent of the assessee and had dealings in earlier years. The Tribunal agreed with the assessee's argument that the inability to file confirmations as required by the AO did not justify the penalty, especially given the assessee's substantial losses and unabsorbed allowances.

Conclusion:
The Tribunal dismissed the Revenue's appeal and allowed the assessee's cross-objection, thereby deleting the penalties imposed u/s 271(1)(c) for both excess depreciation and the alleged fund transfer from M/s R.K. Video Distributor.