2012 (5) TMI 116 - AT - Income Tax

Penalty imposed u/s 271(1)(c) on claim for deduction of excess depreciation and interest on amount borrowed for building which was incomplete Held that - Mere erroneous claim in the absence of any concealment or furnishing of inaccurate particulars, is no ground for levying penalty - there is nothing on record to show that the explanation offered by the assessee was not bona fide or any material particulars were concealed or furnished inaccurate - no fault has been found with the particulars submitted by the assessee in its Return as decided in CIT vs. Reliance Petroproducts Pvt. Ltd. 2010 (3) TMI 80 - SUPREME COURT in favour of assessee.

Issues Involved:
1. Imposition of penalty under Section 271(1)(c) for claiming excessive depreciation on CT scan machine.
2. Imposition of penalty under Section 271(1)(c) for claiming interest on a building loan for a building not used for business purposes during the year.

Detailed Analysis:

1. Penalty for Excessive Depreciation on CT Scan Machine:

Facts:
- The assessee claimed depreciation at 40% on a CT scan machine, considering it as life-saving equipment.
- The Assessing Officer (AO) noted that CT scan machines are not listed under life-saving medical equipment eligible for 40% depreciation and allowed only 25%.
- The AO initiated penalty proceedings under Section 271(1)(c) for concealment of income and furnishing inaccurate particulars.

Assessee's Argument:
- The claim was made under a bona fide belief that CT scan machines are similar to MRI machines, which are eligible for 40% depreciation.
- The claim was not made with any malafide intention, and all relevant particulars were disclosed.

AO's Decision:
- The AO rejected the assessee's explanation, stating that the claim of 40% depreciation was not bona fide and imposed a penalty for furnishing inaccurate particulars.

CIT(A) Decision:
- The CIT(A) confirmed the AO's decision, stating that the assessee furnished inaccurate particulars by claiming higher depreciation.

Tribunal's Analysis:
- The Tribunal observed that the assessee's claim was based on a bona fide belief and all relevant facts were disclosed.
- It referred to the Supreme Court's decision in Reliance Petroproducts Pvt. Ltd., which held that a mere making of a claim, which is not sustainable in law, does not amount to furnishing inaccurate particulars.
- The Tribunal concluded that the claim for higher depreciation was made in a bona fide manner and did not attract penalty under Section 271(1)(c).

Conclusion:
- The Tribunal directed the deletion of the penalty imposed for claiming excessive depreciation on the CT scan machine.

2. Penalty for Claiming Interest on Building Loan:

Facts:
- The assessee claimed interest on a building loan for constructing a building, which was not used for business purposes during the year.
- The AO disallowed the interest claim and initiated penalty proceedings under Section 271(1)(c).

Assessee's Argument:
- The building was constructed by a contractor, and advances were shown as 'advances to contractor' in the balance sheet.
- The building was put to use during the year, and the claim was made under a bona fide belief.

AO's Decision:
- The AO rejected the assessee's explanation, stating that there was no evidence of the building being used for business purposes and imposed a penalty for furnishing inaccurate particulars.

CIT(A) Decision:
- The CIT(A) confirmed the AO's decision, stating that the assessee furnished inaccurate particulars by claiming interest on the building loan.

Tribunal's Analysis:
- The Tribunal noted that the assessee provided all relevant material during the quantum and penalty proceedings.
- It observed that the claim for interest was made under a bona fide belief and all relevant facts were disclosed.
- The Tribunal referred to various judicial precedents, including the Supreme Court's decision in Reliance Petroproducts Pvt. Ltd., which held that a mere disallowance of a claim does not amount to furnishing inaccurate particulars.

Conclusion:
- The Tribunal directed the deletion of the penalty imposed for claiming interest on the building loan.

Final Judgment:
The appeal of the assessee was accepted, and the penalties imposed under Section 271(1)(c) for both issues were deleted. The Tribunal held that the claims were made in a bona fide manner and did not amount to furnishing inaccurate particulars or concealment of income.

← Previous Next →