2014 (2) TMI 941 - AT - Income Tax

Confirmation of Penalty u/s 271(1)(c) of the Act Disallowance of Depreciation on leased assets Held that - The decision in IndusInd Bank Limited Versus Addl. CIT, Range 2(3), Mumbai 2014 (2) TMI 594 - ITAT MUMBAI followed - It is a legal claim made by the assessee and even the same claim was made in the earlier years - The CIT(A) gave a finding that the assessee neither concealed its income nor furnished inaccurate particulars of income and the claim is continuous one thus, the assessee is entitled for the claim of depreciation - this is neither the case of inaccurate particulars of income or concealment of income thus, the penalty is not exigible the order of the CIT(A) reversed Decided in favour of assessee.

Summary

Issues:
Levy of penalty under section 271(1)(c) for disallowance of depreciation on leased assets.

Analysis:
The appeal before the Appellate Tribunal ITAT Mumbai arose from the order of CIT(A) -23, Mumbai, confirming a penalty of Rs. 2,27,90,773/- under section 271(1)(c) for disallowance of depreciation on leased assets. The assessee, a bank involved in leasing assets, had claimed depreciation on leased assets for several years. The department consistently disallowed the depreciation, citing earlier assessment orders disallowing depreciation on assets leased up to AY 1999-2000. The AO added back the disallowed amount, which was upheld by the CIT(A). The issue was not pressed before the ITAT in quantum proceedings. The AR presented the case history from assessment year 1995-96 to 2004-05, highlighting the debatable nature of the issue. The AR pointed out that the Hon'ble Bombay High Court admitted the assessee's case on the same issue, raising substantial questions of law regarding the nature of lease agreements and entitlement to depreciation.

The AR argued for the deletion of penalty, citing various decisions related to the issue and cancellation of penalties. The DR relied on the orders of the revenue authorities. The Tribunal considered the arguments, reviewed statements, orders of the ITAT, and the Hon'ble Bombay High Court's decision admitting the appeal on the issue of depreciation on leased assets. The Tribunal noted the debatable nature of the issue and referenced previous decisions supporting the assessee's claim for depreciation. The Tribunal emphasized that there was no concealment of income or inaccurate particulars of income, leading to the conclusion that penalty was not exigible. Therefore, the Tribunal reversed the CIT(A)'s order and directed the AO to cancel the penalty. The Tribunal held that the basic issue favored the assessee, and the penalty was not warranted in the given circumstances. Consequently, the appeal filed by the assessee was allowed, and the penalty was canceled.