2016 (7) TMI 742 - AT - Income Tax

Penalty u/s 271(1)(c) - claim of depreciation at the rate of 100% on centering material - Held that - AO has demonstrated as to how the claim of the assessee was factually incorrect. In other words, he has demonstrated that it was a false claim. He made reference that originally the item was purchased by P.C. Snehal Construction Company and not the assessee. Thus, the disallowance was not made merely on the basis of difference of opinion between the assessee and the AO. FAA has made reference to the decision of the Hon ble Delhi High Court in the case of CIT Vs. Zoom Communications 2010 (5) TMI 34 - DELHI HIGH COURT for holding that the penalty required to be imposed upon the assessee. The assessee nowhere rendered an explanation that what has operated in his mind while filing the return for claiming depreciation at the rate of 100%. The provision of allowing 100% depreciation on the items valued less than ₹ 5,000/- has been omitted from the statute book by Finance Act, 1995 w.ef. 1.4.1996. Thus, there were two fallacies, viz. (i) in spite of non-availability of depreciation by virtue of amendment carried out in the Act, the assessee had made out a claim, and (ii) the AO has demonstrated that its claim was not factually admissible. The cases laws referred by the assessee are not applicable on the given facts of the case. Therefore, it is of the view that the ld.CIT(A) has rightly confirmed penalty upon the assessee - Decided against assessee.

Summary

Issues:
Challenge to penalty under section 271(1)(c) of the Income Tax Act, 1961 for inaccurate particulars of income.

Analysis:
The case involved the appeal of an assessee against a penalty of ?3,26,200 imposed under section 271(1)(c) of the Income Tax Act, 1961. The dispute arose from the disallowance of depreciation claimed at 100% on centering material valued at less than ?5,000 each. The Assessing Officer (AO) disallowed the claim of ?9,69,102, stating that the items were originally purchased by another entity and not the assessee. The AO initiated penalty proceedings for furnishing inaccurate particulars of income. The assessee contended that the disagreement with the AO did not warrant a penalty, citing relevant case laws. The First Appellate Authority confirmed the penalty, emphasizing the factual inaccuracy of the claim and the omission of the provision allowing 100% depreciation on low-value items in the statute. The Tribunal upheld the penalty, concluding that the assessee's explanations were insufficient and the penalty was justified under section 271(1)(c).

The key provision in question was section 271(1)(c) of the Income Tax Act, which allows for the imposition of a penalty if an assessee has concealed income or furnished inaccurate particulars of income. The penalty can range from 100% to 300% of the tax sought to be evaded. The section also includes deeming provisions regarding concealment of income, where failure to explain or substantiate facts material to income computation can lead to penalties. In this case, the AO demonstrated the factual incorrectness of the depreciation claim, indicating that it was a false claim. The First Appellate Authority referenced relevant case law to support the imposition of the penalty. The Tribunal found that the assessee's failure to provide a satisfactory explanation for the inaccurate claim warranted the penalty under section 271(1)(c).

In conclusion, the Tribunal upheld the penalty imposed on the assessee for furnishing inaccurate particulars of income regarding the disallowed depreciation claim. The decision was based on the factual inaccuracies in the claim, the absence of a valid explanation from the assessee, and the relevant provisions of section 271(1)(c) of the Income Tax Act. The appeal of the assessee was dismissed, affirming the penalty under the specified section.