2012 (9) TMI 1013 - AT - Income Tax

Penalty u/s. 271(1)(c) - no penalty could be levied merely on disallowance of a deduction, which was made by taking a different view.

Summary

Issues:
- Appeal against deletion of penalty u/s. 271(1)(c) of the I.T. Act by Ld. CIT (A)-I, Surat for the assessment year 2005-06.

Detailed Analysis:

1. Grounds of Appeal by Revenue:
The Revenue filed an appeal against the order of Ld. CIT (A)-I, Surat, challenging the deletion of penalty u/s. 271(1)(c) of the I.T. Act amounting to Rs. 3,96,495. The appeal was based on the contention that the assessee had claimed excess depreciation on machinery purchased for texturizing yarn, which was not entitled to the higher rate of depreciation, leading to inaccurate particulars of income.

2. Assessment Proceedings and Penalty Imposition:
During assessment, the Assessing Officer (A.O.) disallowed excess depreciation claimed by the assessee, leading to the imposition of penalty under section 271(1)(c). The A.O. held that the assessee had concealed income by furnishing inaccurate particulars, citing the decision in Union of India vs. Dharmendra Textile Processors. The penalty amount levied was Rs. 3,96,495.

3. CIT (A) Decision and Rationale:
The assessee contended before CIT (A) that the claim of depreciation at 50% was made in good faith, believing it was entitled to the higher rate due to purchasing machinery under the TUF Scheme. CIT (A) agreed with the assessee, stating that it was a bonafide claim and not a case of furnishing inaccurate particulars or concealment of income. Consequently, CIT (A) deleted the penalty levied by the A.O.

4. Appellate Tribunal Decision:
The Department appealed before the Appellate Tribunal, arguing that the penalty was rightly imposed as the assessee furnished inaccurate particulars of income by claiming higher depreciation. The Tribunal considered the facts that the machinery was purchased under the TUF Scheme and the dispute was regarding the rate of depreciation. Relying on the decision in Eagle Fibres Pvt. Ltd. case, the Tribunal held that the claim was not bogus, and the dispute was about the correct rate of depreciation, not concealment of income.

5. Final Tribunal Decision and Dismissal of Appeal:
The Tribunal upheld CIT (A)'s decision to delete the penalty, citing the similarity of facts with the Eagle Fibres Pvt. Ltd. case. It emphasized that the dispute was about the correct entitlement of depreciation, which was a debatable issue. Relying on the decision in CIT vs. Reliance Petroproducts, the Tribunal dismissed the Revenue's appeal, concluding that there was no reason to interfere with CIT (A)'s order.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the deletion of the penalty u/s. 271(1)(c) by CIT (A) based on the bonafide belief of the assessee regarding the claim of depreciation at a higher rate under the TUF Scheme.