2016 (12) TMI 1416 - AT - Income Tax

Penalty u/s 271(1)(c) - Addition on account of excess depreciation on tanker and disallowance u/s. 37(1) - Held that - CIT(A) observed that during the course of proceedings u/s. 154 before the AO the assessee has given sufficient evidence to establish his claim. Moreover, the fact that the assessee has given the tanker on hire is also evident from the balance sheet of the assessee wherein an amount of ₹ 7,02,186 has been shown as the tanker hire receipts in the profit and loss account. The balance sheet was before the AO when the assessment u/s. 143(3) of the I.T. Act was framed. It was further noted that the assessee is also furnished letter dated 8.8.2014 addressed to the AO and furnished to the AO during the course of assessment proceedings, wherein at Point No. 14 it has been clearly mentioned that freight charges on tanker have been received from Anil & Company (which clearly shows that the tankers have been given on hire). Thus find that it is clearly established that the tankers have been given on rent and the allowable depreciation rate under these circumstances is @30% as against 15% allowed by the AO and 50% claimed by the assessee in his return of income. Thus the AO was directed to recomputed the depreciation on both the tankers @30%, which establishes that assessee has not furnished inaccurate particulars of its income and is not liable for penalty u/s 271(1)(c). Merely, because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty u/sec. 271(1)(c). If we accept the contention of the Revenue then in case of every return where the claim made is not accepted by the Assessing Officer for any reason, the assessee will invite penalty u/sec. 271(1)(c). - Decided in favour of assessee

Summary

Issues:
Appeal against penalty imposed under section 271(1)(c) for furnishing inaccurate particulars of income.

Analysis:
1. The Assessee challenged the penalty imposed by the Assessing Officer (AO) under section 271(1)(c) for claiming higher depreciation. The Assessee contended that the depreciation on a tanker was claimed at 50%, while the AO allowed it at 15%. The Assessee subsequently filed an application under section 154 requesting depreciation at 30%, which was rejected by the AO. The First Appellate Authority directed the AO to recomputed depreciation at 30%, supporting the Assessee's claim. The Tribunal noted that the Assessee provided sufficient evidence to establish the claim and had given the tanker on hire, as evidenced by financial records. The Tribunal held that the Assessee did not furnish inaccurate particulars of income, citing the decision in CIT vs. Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR-158 (SC), emphasizing that a mere unsustainable claim does not attract penalty under section 271(1)(c).

2. The Tribunal observed that the AO's rejection of the Assessee's claim under section 154 was based on the grounds that the mistake was not apparent from the record and that the Assessee did not address the issue during assessment proceedings. However, the Tribunal found that the Assessee's submissions during the section 154 proceedings provided sufficient evidence to support the claim. The Tribunal emphasized that the Assessee's actions did not amount to furnishing inaccurate particulars of income, as all details were disclosed in the return and the claim was a matter of interpretation, not concealment.

3. The Tribunal concluded that the penalty imposed was unwarranted and ordered its deletion, as the Assessee had not furnished inaccurate particulars of income. The Tribunal relied on the precedent set by the Supreme Court and held that the Assessee's claim, even if not accepted by the Revenue, did not attract penalty under section 271(1)(c). The Tribunal allowed the Assessee's appeal, cancelling the penalty and upholding the Assessee's position regarding depreciation on the tanker.

In summary, the Tribunal ruled in favor of the Assessee, holding that the penalty imposed under section 271(1)(c) was unjustified as the Assessee had not furnished inaccurate particulars of income, but rather made a claim subject to interpretation, which did not warrant penalty under the law.