2015 (4) TMI 910 - AT - Income Tax

Levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 - Concealment of particulars of Income - Concealment of income - Depreciation claimed on leasehold rights in land as intangible asset - Held that - In view thereof, where the Tribunal has come to a finding that the assessee is not entitled to the depreciation even under section 32(1)(ii) of the Act in respect of leasehold rights of land, the contention of the assessee that it was not claiming depreciation on land perse but was claiming depreciation on leasehold rights in land which were business or commercial rights and therefore, intangible assets under section 32(1)(ii) of the Act, does not stand the test of time. Where the explanation tendered by the assessee in respect of its claim on depreciation on the leasehold rights of land was found to be untenable, Explanation - 1 to section 271(1)(c) of the Act is clearly attracted and the assessee is exigible to levy of penalty under section 271(1)(c) of the Act. Even otherwise, the perusal of the record reflects that the assessee in the return of income had claimed the depreciation on land perse and not on intangible assets. The said claim was against the provisions of the Act and was thus not bonafide claim made by the assessee. On this account also, the assessee is liable to levy of penalty under section 271(1)(c) of the Act. Another contention raised by the assessee was that merely because the claim by it had been held to be not correct, would not amount to furnishing of in-accurate particulars of income. Reliance in this regard was placed on the ratio laid down by the Hon ble Supreme Court in Price Waterhouse Coopers 2012 (9) TMI 775 - SUPREME COURT . The said plea of the assessee does not stand because it is undisputed that the claim made by the assessee, was not bonafide. The claim of the assessee in any case, was not sustainable in law and in view of the above, where the explanation of the assessee is not found to be bonafide, the assessee is liable to levy of penalty under section 271(1)(c) of the Act. Accordingly, we uphold the order of CIT(A) in confirming the levy of penalty under section 271(1)(c) of the Act. - Decided against the assessee.

Summary

Issues Involved:
1. Levy of penalty under section 271(1)(c) of the Income Tax Act, 1961.
2. Claim of depreciation on leasehold rights in land under section 32(1)(ii) of the Act.
3. Allegation of furnishing inaccurate particulars of income.
4. Applicability of Explanation 1 to section 271(1)(c).

Issue-wise Detailed Analysis:

1. Levy of Penalty under Section 271(1)(c) of the Income Tax Act, 1961:
The primary issue in this appeal is the levy of penalty under section 271(1)(c) of the Income Tax Act, 1961. The assessee was penalized for allegedly furnishing inaccurate particulars of income by claiming depreciation on leasehold rights in land as an intangible asset under section 32(1)(ii). The penalty was upheld by the CIT(A), which led to the present appeal.

2. Claim of Depreciation on Leasehold Rights in Land under Section 32(1)(ii):
The assessee had acquired a running unit, including leasehold rights in land, and claimed depreciation on these rights under section 32(1)(ii) of the Act. The assessee argued that leasehold rights constituted business or commercial rights, thus qualifying as intangible assets. However, the Assessing Officer and the Tribunal disagreed, stating that the leasehold rights did not fall under the category of intangible assets eligible for depreciation under the specified section.

3. Allegation of Furnishing Inaccurate Particulars of Income:
The Assessing Officer held that the assessee had furnished inaccurate particulars of income by claiming depreciation on leasehold rights. The Tribunal upheld this view, emphasizing that the claim was not bonafide and did not align with the provisions of the Act. The Tribunal noted that the assessee's explanation was untenable and thus attracted the provisions of Explanation 1 to section 271(1)(c).

4. Applicability of Explanation 1 to Section 271(1)(c):
Explanation 1 to section 271(1)(c) stipulates that if a person fails to offer a bonafide explanation for the particulars of income or if the explanation is found to be false, the income in question is deemed to be concealed. In this case, the Tribunal found the assessee's explanation regarding the depreciation claim on leasehold rights to be not bonafide. Consequently, the Tribunal concluded that the assessee was liable for penalty under section 271(1)(c).

Conclusion:
The Tribunal dismissed the appeal, upholding the penalty under section 271(1)(c). The Tribunal emphasized that the assessee's claim for depreciation on leasehold rights was not bonafide and did not meet the criteria for intangible assets under section 32(1)(ii). The Tribunal also highlighted that the assessee's explanation was not substantiated, thus justifying the penalty under the provisions of Explanation 1 to section 271(1)(c). The order was pronounced on February 13, 2015.