2018 (5) TMI 757 - AT - Income Tax

Penalty proceedings u/s. 271(1)(c) - excess depreciation w.r.t. Building - Held that - In view totality of the factual matrix of the case and without commenting on the merits of the claim for such excess depreciation in quantum, the assessee has in-fact furnished true and complete particulars of its income before the AO. It is another matter that the claim filed by the assessee towards excess depreciation which was based on the opinion of advocate of Supreme Court was later withdrawn by the assessee during the course of assessment proceedings taking conservative view to avoid litigation and buy peace. It is well established by catena of judgments that mere making of a claim which did not found favour with the Revenue will not automatically lead to levy of penalty u/s. 271(1)(c) for furnishing of inaccurate particulars of income or for concealment of income. - Decided in favour of assessee.

Summary

Issues Involved:
1. Confirmation of penalty levied under Section 271(1)(c) for excess depreciation claim.
2. Assessment of bonafide nature of the assessee's explanation for excess depreciation.

Issue-wise Detailed Analysis:

1. Confirmation of Penalty Levied under Section 271(1)(c) for Excess Depreciation Claim:

The primary issue in the appeal was whether the penalty of ?30,40,000/- levied by the AO under Section 271(1)(c) for claiming excess depreciation on a building amounting to ?91,31,916/- was justified. The assessee had initially claimed depreciation on a revalued amount of ?12,80,55,911/- for a building taken over from a partnership firm, which was later withdrawn during assessment proceedings. The AO and CIT(A) both confirmed the penalty, arguing that the assessee filed inaccurate particulars of income by claiming excess depreciation, which was only withdrawn after being cornered by the Revenue.

2. Assessment of Bonafide Nature of the Assessee's Explanation for Excess Depreciation:

The assessee contended that the excess depreciation claim was based on a bonafide belief, supported by an advocate's opinion. The firm M/s Waman Hari Pethe Sons revalued its building, and the assessee took over the revalued assets. The assessee claimed depreciation based on the revalued figures, supported by legal advice from a Supreme Court advocate. The assessee argued that the claim was made in good faith and was withdrawn during assessment proceedings to avoid litigation and buy peace. The assessee also revised returns for subsequent years, withdrawing the excess depreciation claim and paying due taxes.

The tribunal observed that the assessee had furnished true and complete particulars of its income and that the claim for excess depreciation was based on a bonafide belief supported by legal advice. The tribunal referenced several case laws, including the Supreme Court decision in CIT v. Reliance Petroproducts Private Ltd., which established that merely making a claim that is not accepted by the Revenue does not automatically lead to penalty under Section 271(1)(c). The tribunal concluded that the assessee's explanation was plausible and bonafide, taking it out of the clutches of penalty provisions.

Conclusion:

The tribunal allowed the appeal, ordering the deletion of the penalty levied by the AO under Section 271(1)(c) to the tune of ?30,40,000/-. The assessee succeeded in demonstrating that the excess depreciation claim was made in good faith based on legal advice and that the explanation provided was bonafide and plausible.