2017 (5) TMI 1470 - HC - Income Tax

Penalty u/s 271(1)(c) - claim of excess rate of depreciation on plant, machinery and building - deliberate intention of the assessee to furnish inaccurate particulars of income - Held that - Held that - ITAT in cancelling the penalty has gone through the decision in case of Commissioner of Income Tax. v. Dharamshi B. Shah 2014 (7) TMI 98 - GUJARAT HIGH COURT wherein it was held that penalty under section 271(1)(c) could not be deleted on sole ground that assessee s appeal in respect of addition on basis of which penalty was levied had been admitted by High Court. In the instant case, the AO has held that the assessee didn t take into account the relevant provisions of the Act while working out the depreciation. The ld CIT(A) has given a categorical finding that the assessee had disclosed all material facts pertaining to the claim of depreciation admissible under section 32 of the Act. It is thus a case where there is difference of opinion in terms of rate of depreciation in respect of the specified assets. Thus, the subject decision of Hon ble Gujarat High Court is distinguishable on facts as even on merits, it cannot be held that penalty is leviable in the instant case. We are in complete agreement with the view taken by the Tribunal - Decided against revenue

Summary

Issues:
Appeal against Tribunal's order dismissing department's appeal - Justification of canceling penalty under section 271(1)(c) for excess depreciation claim.

Analysis:
1. The appellant challenged the Tribunal's decision dismissing the department's appeal. The substantial question of law framed was whether the ITAT was justified in canceling the penalty imposed by the Assessing Officer under section 271(1)(c) for claiming excess depreciation on plant, machinery, and building without deliberate intention to furnish inaccurate particulars of income.

2. The Tribunal based its decision on the Gujarat High Court case of Commissioner of Income Tax v. Dharamshi B. Shah 366 ITR 140. The Tribunal noted that the CIT(A) had compared the present case with the Rupam Mercantile case and the Rajasthan High Court's decision in Income Tax Appeal No. DBITA No. 53/2011. Additionally, reference was made to similar decisions by Coordinate Benches and the Delhi High Court's ruling in liquid investment limited case. The Tribunal emphasized that the issue of depreciation claim was debatable, and penalty under section 271(1)(c) was not applicable when the substantial question of law was admitted by the High Court.

3. The Tribunal also analyzed the Gujarat High Court's decision in Commissioner of Income Tax v. Dharamshi B. Shah 366 ITR 140. It was noted that in the instant case, the Assessing Officer contended that the assessee did not consider the relevant provisions of the Act while calculating depreciation. However, the CIT(A) found that the assessee had disclosed all material facts regarding the depreciation claim under section 32 of the Act. The Tribunal concluded that there was a difference of opinion on the rate of depreciation for specified assets, making the Gujarat High Court's decision distinguishable. Therefore, even on merits, the Tribunal held that the penalty was not leviable in this case.

4. The High Court concurred with the Tribunal's view, stating that no substantial question of law arose in the matter. Consequently, the appeal was dismissed, upholding the Tribunal's decision to cancel the penalty under section 271(1)(c) for the excess depreciation claim.