2012 (10) TMI 898 - AT - Income Tax

Penalty u/s 271(1)(c) - dis-allowances on account of excess depreciation on farm house and commercial flats - Held that - On perusal of penalty order it is found that not even a whisper has been made in the penalty order as to which specific particulars were furnished inaccurate or were concealed. Mere erroneous claim in the absence of any concealment or furnishing of inaccurate particulars, is no ground for levying penalty, especially when 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. In the instant case, the assessee discharged the onus cast on it in terms of explanation 1 to sec. 271(1)(c) and there is nothing to suggest that the assessee furnished any inaccurate particulars or concealed the particulars. Admittedly, the claim for deduction of depreciation was there in the documents forwarded with the return. penalty is directed to be deleted - Decided in favor of assessee

Issues Involved:
1. Confirmation of penalty under Section 271(1)(c) of the Income Tax Act, 1961.
2. Disallowance of depreciation on farm house and commercial flats.
3. Assessment of whether the claim for depreciation was bona fide and whether material facts were disclosed.

Detailed Analysis:

1. Confirmation of Penalty under Section 271(1)(c) of the Income Tax Act, 1961:
The case revolves around the confirmation of a penalty of Rs. 1,26,423/- imposed by the Assessing Officer (AO) under Section 271(1)(c) of the Income Tax Act, 1961. The penalty was confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)], and the assessee challenged this confirmation.

2. Disallowance of Depreciation on Farm House and Commercial Flats:
The AO disallowed depreciation claims on a farm house and commercial flats, totaling Rs. 3,45,490/-, which was sustained by the first appellate authority. The assessee argued that similar disallowances in the assessment year 2006-07 did not attract penalties and cited various case laws to support the plea for deletion of the penalty.

3. Assessment of Whether the Claim for Depreciation was Bona Fide and Whether Material Facts were Disclosed:
The Tribunal analyzed whether the claim for depreciation was bona fide and if the material facts were disclosed. It was noted that the penalty order did not specify which particulars were inaccurate or concealed. The Tribunal referred to the definitions of "conceal" and "inaccurate" and emphasized that penalty proceedings are distinct from assessment proceedings. The Tribunal also cited Explanation 1 to Section 271(1)(c), which outlines conditions under which an assessee is deemed to have concealed income.

The Tribunal concluded that the assessee had disclosed all relevant particulars and that the claim for depreciation, though disallowed, was made in a bona fide manner. The Tribunal referenced the Supreme Court's observation in the case of Dilip N. Shroff v. Jt. CIT, which highlighted that the mere rejection of a claim does not amount to concealment or furnishing inaccurate particulars.

The Tribunal further cited the Supreme Court's decision in CIT v. Reliance Petroproducts (P.) Ltd., which stated that merely making a claim that is not sustainable in law does not amount to furnishing inaccurate particulars. The Tribunal found that the assessee's claim for depreciation was disclosed in the return and that no inaccurate particulars were furnished.

Conclusion:
The Tribunal held that the penalty under Section 271(1)(c) was not justified as the assessee had disclosed all material facts and the claim for depreciation was bona fide. The appeal of the assessee was accepted, and the penalty was directed to be deleted.

Final Judgment:
The appeal of the assessee was accepted, and the penalty imposed under Section 271(1)(c) was deleted. The order was pronounced in open court on 18.07.2012.

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