2013 (12) TMI 1099 - AT - Income Tax

Penalty u/s 271(1)(c) Deprec ation on Portal & e-Commerce Site - Held that - Following CIT Vs. Reliance Petro Product P. Ltd. 2010 (3) TMI 80 - SUPREME COURT - Expenses incurred on developing Portal & e-Commerce Site is neither fixed asset nor an intangible asset as per section 2(11)(b) - AO disallowed depreciation - It is only disallowance of expenditure only on the basis that this is not an asset. The expenses are genuine, which are not denied by the AO. It is not doubted that the assessee has not developed Portal & e-Commerce Site and nothing is false - There is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(1)(c) Decided against Revenue.

Summary

Issues:
- Appeal against the deletion of penalty under section 271(1)(c) of the Income-tax Act on wrong claim of depreciation.

Analysis:
1. The appeal by the revenue challenges the deletion of penalty under section 271(1)(c) of the Income-tax Act by the CIT(A) concerning the wrong claim of depreciation. The Revenue raised four grounds against the CIT(A)'s decision, contending that the claim on Portal & e-Commerce Site for depreciation was incorrect as it did not qualify as a depreciable asset under the law. The AO disallowed the depreciation and initiated penalty proceedings based on the claim made by the assessee.

2. The assessee argued that the Portal & e-Commerce Site was treated as a virtual fixed asset, akin to other assets, and therefore, depreciation was claimed on it. The CIT(A) observed that the assessee had disclosed all material facts regarding the Portal & e-Commerce Site in its return of income, treating it as an asset in the balance sheet. The CIT(A) concluded that there was no concealment or furnishing of inaccurate particulars of income by the assessee, leading to the deletion of the penalty under section 271(1)(c).

3. The ITAT Kolkata, after considering the rival submissions and the facts of the case, referred to the judgment of the Hon'ble Supreme Court in CIT Vs. Reliance Petro Product P. Ltd. The ITAT noted that the AO disallowed depreciation on the grounds that the expenses incurred on developing the Portal & e-Commerce Site did not qualify as a fixed or intangible asset under the Act. However, the ITAT emphasized that the penalty under section 271(1)(c) is attracted when there is concealment or furnishing of inaccurate particulars of income, which was not the case here.

4. The ITAT upheld the CIT(A)'s decision to delete the penalty, stating that the disallowance of depreciation was not based on concealment or furnishing of inaccurate particulars but rather on the classification of the expenses as non-asset related. The ITAT concluded that the penalty deletion by the CIT(A) was in accordance with the law, and therefore, dismissed the appeal of the revenue.

5. In summary, the ITAT Kolkata dismissed the revenue's appeal against the deletion of the penalty under section 271(1)(c) of the Income-tax Act, emphasizing that the disallowance of depreciation did not amount to concealment or furnishing of inaccurate particulars of income, leading to the confirmation of the CIT(A)'s decision.