2015 (2) TMI 805 - HC - Income Tax

Penalty under section 271(1)(c) - furnishing false information in respect of investment allowance/ depreciation claims, while the quantum appeal of the assessee before the hon'ble High Court is pending for decision - ITAT deleted the addition - Held that - The assessee had produced the report of M/s. Blue Star Ltd. through whom the assessee had purchased the machineries and who were responsible for erecting and commissioning of the same which corroborated the version of the assessee. The purchase of machinery during the assessment year 1977-78 was not doubted in view of bills, gate pass, freight charges paid, etc. However, while disallowing depreciation and investment allowance, on the basis of the report of M/s. ABC Consultants Ltd., it was recorded that the machinery was not put to use during the assessment year 1977-78. The report of M/s. ABC Consultants Ltd. was preferred over the report of M/s. Blue Star Ltd. and addition on account of disallowance of depreciation and investment allowance was sustained during the assessment proceedings. In the present case, the Tribunal while deleting the penalty had discussed the plausibility of both the reports and adopted a view deleting the penalty levied which is acceptable even though the addition has been sustained in the assessment proceedings regarding disallowance of depreciation and investment allowance by preferring one set of evidence.- Decided in favour of the assessee

Summary

Issues:
Question of law referred regarding deletion of penalty under section 271(1)(c) based on furnishing false information in investment allowance/depreciation claims while quantum appeal pending.

Analysis:
1. The judgment involves a question of law referred by the Revenue regarding the deletion of penalty under section 271(1)(c) by the Income-tax Appellate Tribunal. The controversy arose from the assessment year 1977-78 where the assessee claimed investment allowance and depreciation based on allegedly false information about machinery installation and use.

2. The assessment was completed in 1986, with penalties initiated under section 271(1)(c) due to the false information provided by the assessee. The penalty was levied by the Inspecting Assistant Commissioner of Income-tax. Subsequent appeals to the Commissioner of Income-tax (Appeals) and the Tribunal upheld the penalty, leading to the present appeal by the assessee.

3. The Revenue argued that since the Assessing Officer and the Commissioner of Income-tax (Appeals) had ruled against the assessee in the quantum proceedings, the Tribunal erred in deleting the penalty. Conversely, the assessee's counsel cited various judgments to support their case, emphasizing discrepancies in reports from different consultants regarding machinery installation.

4. The Tribunal, in its findings, highlighted the conflicting reports from M/s. ABC Consultants Ltd. and M/s. Blue Star Ltd. regarding machinery installation. It noted that the Tribunal upheld the addition in the quantum appeal based on the report of M/s. ABC Consultants Ltd. The Tribunal concluded that the penalty deletion was justified due to the differing evidence and directed by the High Court to refer the questions of law.

5. The High Court found no merit in the Revenue's argument, noting that the assessee's evidence from M/s. Blue Star Ltd. supported their claims. The Tribunal's decision to delete the penalty was upheld based on the plausibility of both reports and the absence of evidence fabrication.

6. Ultimately, the High Court answered the question of law in favor of the assessee, emphasizing the Tribunal's discretion in assessing conflicting evidence and deleting the penalty. The reference was disposed of accordingly, favoring the assessee over the Revenue.