2018 (3) TMI 1036 - AT - Income Tax

Penalty u/s 271(1)(c) - deducting the cost of fixed assets by the amount of capital subsidy received from the Govt - disallowed the excess depreciation - Held that - The only lapse on the part of the assessee unearthed by the AO in the assessment proceedings was that instead of deducting the cost of fixed assets by the amount of capital subsidy received from the Govt., the assessee had shown it as part of reserves in the balance sheet and for this lapse, the AO had already disallowed the excess depreciation claimed. These facts, however, nowhere go to suggest that the assessee had furnished the inaccurate particulars to attract penalty u/s. 271(1)(c). Had the assessee not declared the capital subsidy received and claimed the depreciation on full value of capital assets, the matter would have been different. However, once all the information were given in the return of income accompanied by relevant books maintained by assessee, in our considered opinion, simple disallowance of depreciation will not amount to furnishing of inaccurate particulars, as held in the case of CIT vs. Ajaib Singh & Co. 2001 (8) TMI 79 - PUNJAB AND HARYANA High Court and other several decisions relied by the assessee before us including CIT vs. Reliance Petroproducts Pvt. Ltd (2010 (3) TMI 80 - SUPREME COURT). - Decided in favour of assessee.

Summary

Issues:
1. Appeal against penalty order by CIT(A) for assessment year 2009-10.
2. Validity of penalty u/s 271(1)(c) for furnishing inaccurate particulars of income.
3. Disallowance of excess claim of depreciation and penalty imposition.
4. Challenge to penalty sustained by CIT(A) on depreciation claim.
5. Applicability of case laws and legal precedents in penalty proceedings.

Analysis:

Issue 1:
The appeal was filed by the assessee against the penalty order by the CIT(A) for the assessment year 2009-10, challenging the imposition of penalty under section 271(1)(c) for furnishing inaccurate particulars of income.

Issue 2:
The penalty was imposed by the AO based on the premise that the assessee had received capital subsidy but failed to deduct it from the cost of fixed assets, resulting in an excess claim of depreciation. The AO considered this as furnishing inaccurate particulars of income leading to penalty imposition.

Issue 3:
The AO initiated penalty proceedings after making additions in the assessment, including disallowance of excess claim of depreciation and proportionate expenses. The penalty was imposed under section 271(1)(c) for allegedly furnishing inaccurate particulars of income.

Issue 4:
The CIT(A) sustained the penalty on the excess claim of depreciation but deleted the penalty imposed on another addition. The assessee challenged the sustenance of penalty on depreciation claim before the Tribunal.

Issue 5:
The assessee relied on various case laws and legal precedents to argue against the penalty imposition. The submissions highlighted that a mere disallowance of depreciation does not amount to furnishing inaccurate particulars of income, as supported by judicial decisions.

The Tribunal, after considering the submissions and case laws, found that the assessee had declared all relevant information in the return of income, including the capital subsidy received and the value of fixed assets. The Tribunal opined that the disallowance of depreciation alone did not constitute furnishing inaccurate particulars, citing legal precedents.

In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing that the disallowance of depreciation, in this case, did not warrant penalty under section 271(1)(c) as it did not amount to furnishing inaccurate particulars of income.

This detailed analysis encapsulates the key issues raised in the legal judgment, providing a comprehensive understanding of the case and its implications.