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Issues involved:
The issues involved in this case are the disallowance of depreciation claimed by the assessee, initiation of penal proceedings under section 271(1)(c) of the Income Tax Act, and the appeal against the penalty imposed. Depreciation Disallowance Issue: The assessee, a company manufacturing abrasives and refractors, claimed deduction under section 35AB and depreciation under section 32 of the Income Tax Act for the assessment year 1991-92. The Assessing Officer disallowed the depreciation, citing it as a double deduction. However, the CIT(A) and the Tribunal held that the assessee had a bona fide belief in claiming double deduction, considering the unsettled nature of the issue at the time. The Tribunal also noted that various court decisions supported the allowance of double deduction. The Tribunal found that the assessee's actions were not false or inaccurate, leading to the dismissal of the penalty under section 271(1)(c). Penalty Imposition Issue: The Assessing Officer initiated penal proceedings under section 271(1)(c) of the Act, levying a penalty on the assessee for making an excess claim and providing inaccurate particulars to evade tax. However, the CIT(A) and the Tribunal both ruled in favor of the assessee, stating that the claim for double deduction was made in good faith based on legal advice and precedents. The Tribunal found that the assessee had a genuine belief in being entitled to the deductions claimed, and therefore, the penalty was deleted. Supreme Court Decisions and Legal Interpretation: The judgment references various Supreme Court decisions regarding the interpretation of section 271(1)(c) of the Income Tax Act. The Court emphasized the importance of proving deliberate concealment or furnishing of inaccurate particulars to impose a penalty. It highlighted that the burden of proof lies on the Department to establish concealment of income. The Court also discussed the strict construction of penal provisions and the need for a deliberate act on the part of the assessee to warrant a penalty. The judgment reiterated that mere omission or negligence does not constitute deliberate concealment or furnishing of inaccurate particulars. Ultimately, based on the legal principles outlined by the Supreme Court, the appeal by the Revenue was dismissed.
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