2016 (8) TMI 1481 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - Higher rate of depreciation on truck - @ 30% or 50% - assessee filed a revised chart of depreciation in which he calculated depreciation @ 30% on old trucks purchased from NBI Finance - assessee had finally claimed total depreciation of 7, 03, 22, 480/- after rectifying the mistake and unabsorbed depreciation was carried forward to the tune of 3, 20, 81, 299/- only - HELD THAT - It emerges from the records that the assessee claimed depreciation on the newly acquired trucks @ 50% as there was a provision in the Schedule that new commercial vehicle acquired between the periods 01-01-2009 till 30-09-2009 depreciation shall be available @ 50%. However these trucks were newly acquired by the assessee but they were not new. Therefore the claim of depreciation was revised by the assessee during the assessment proceedings. After adjustment there was carry forward unabsorbed depreciation of 3, 20, 81, 299/-. Similar claim of depreciation was disallowed in the assessment years 2011-12 but no penalty u/s 271(1) of the Act was initiated. As per assessment order dated 6-11-2015 relating to assessment year 2013-14 the carry forward unabsorbed depreciation was more than 14.00 crores. The assessee has declared Short term capital gain on the sale of these trucks in the assessment year 2013-14 and capital gain has been calculated by taking depreciation @ 30%. All these facts suggest that there was an inadvertent mistake on the part of the assessee for claiming depreciation and same was rectified as soon as it was noticed. Direct to delete the penalty levied u/s 271(1)(C) - Decided in favour of assessee.

Summary

Issues Involved:
1. Levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961.
2. Classification of trucks as "new" for depreciation purposes.
3. Bona fide belief and professional expertise in claiming depreciation.
4. Specificity of the charge for penalty proceedings.
5. Comparison with previous assessment years and similar cases.

Detailed Analysis:

1. Levy of Penalty under Section 271(1)(c) of the Income Tax Act, 1961:
The primary issue revolves around the imposition of a penalty amounting to ?7.50 lacs under Section 271(1)(c) of the Income Tax Act, 1961. The Assessing Officer (AO) initiated penalty proceedings due to the assessee's claim of higher depreciation on old trucks purchased from NBI Finance, which was later revised during assessment proceedings. The AO concluded that the assessee had "not disclosed his true particulars of income" and imposed the penalty, stating that the concealment of income was evident and the explanation provided by the assessee was unsatisfactory.

2. Classification of Trucks as "New" for Depreciation Purposes:
The assessee claimed depreciation at 50% on trucks purchased from NBI Finance, treating them as "new" assets. However, the AO contended that these trucks were old and should be depreciated at the normal rate of 30%. The assessee revised the depreciation claim during assessment proceedings, reducing the total depreciation claimed. The CIT(A) upheld the penalty, stating that the trucks could not be considered "new" as they were previously used and depreciation had already been claimed by the earlier owner.

3. Bona Fide Belief and Professional Expertise in Claiming Depreciation:
The assessee argued that the claim of higher depreciation was made under a bona fide belief that the trucks were new for the company. The CIT(A) rejected this explanation, stating that it was difficult to comprehend how such a mistake could occur given the professional expertise available to the assessee. The CIT(A) concluded that the explanation was not bona fide and the claim was patently wrong.

4. Specificity of the Charge for Penalty Proceedings:
The assessee contended that the AO did not specify whether the penalty was for "concealment of income" or "furnishing inaccurate particulars of income." The AO's notice and the penalty order contained ambiguous language, mentioning both charges interchangeably. The assessee argued that the charge must be specific and clear, as the initial onus to explain and rebut the charge lies with the assessee. The lack of specificity in the charge was highlighted as a procedural flaw.

5. Comparison with Previous Assessment Years and Similar Cases:
The assessee pointed out that in the assessment year 2011-12, a similar disallowance of depreciation was made, but no penalty was initiated. Additionally, the assessee cited various case laws where penalties were deleted under similar circumstances, arguing that the claim of higher depreciation was a bona fide mistake with no tax advantage. The assessee also highlighted that the trucks were sold in the assessment year 2013-14, and short-term capital gains were declared, indicating no intention to conceal income.

Conclusion:
The tribunal, after considering the facts and various case laws, concluded that the assessee's claim of higher depreciation was an inadvertent mistake. The tribunal noted that the assessee revised the depreciation claim during assessment proceedings and there was no tax advantage gained. The tribunal directed the deletion of the penalty of ?7.50 lacs levied under Section 271(1)(c) of the Act, allowing the appeal of the assessee.