2019 (3) TMI 1003 - HC - Income Tax

Penalty u/s 271(1)(c) - defraud by making false depreciation claim - pant and machinery, namely three Pay Loaders in question were not actually used - proof of conscious concealment or a deliberate filing of inaccurate particulars - existence of mens rea or guilty animus - HELD THAT - The words 'use' in Section 32 is not restricted to actual, full or continuous user of Plant and Machinery. It includes within its ambit the status of 'kept ready for use' or 'ready for use' as well. A partial user is also sufficient to apply Section 32 of the Act. For the reasons best known to the assessee, may be to buy peace and to avoid litigation or under pressure not knowing the correct legal position, he gave up the said claim of depreciation under Section 32 but, that does not mean that the assessee admitted the guilt of giving a wrong explanation or a false explanation or having concealed his income or filing inaccurate particulars. There was a total absence of mens rea or guilty animus on the part of assessee in present case. Giving up of the claim of depreciation could not automatically entail the penalty under Section 271(1)(c) of the Act. The imposition of penalty is neither automatic nor is expected to be imposed even if the bona fide explanation of the assessee is not finally accepted by the statutory authorities of the Act. The burden of proving the guilty animus on the part of the assessee is on the Revenue, like on Prosecution in criminal cases and no such negative burden could be cast upon by the assessee himself. No material on record brought by A which would indicate, much less, prove the guilty animus on the part of the assessee in the present case. Therefore, the restoration of penalty in the present case by the Second Appellate Authority, Tribunal, should fall to the ground. - Decided in favour of assessee.

Issues Involved:
1. Whether the assessee was entitled to claim depreciation on three Pay Loaders purchased on the last day of the previous year.
2. Whether the penalty under Section 271(1)(c) of the Income Tax Act for concealment of income and filing of inaccurate particulars was justified.

Issue-wise Detailed Analysis:

1. Entitlement to Claim Depreciation:
The primary issue was whether the assessee could claim depreciation for three Pay Loaders purchased on 31.3.2000. The Assessing Authority denied the depreciation claim, stating the Pay Loaders were not actually put to use during the previous year. The assessee initially claimed that the Pay Loaders were delivered and brought to Chennai Port on the same day, but later gave up the claim to avoid litigation. The Tribunal upheld the Assessing Authority's decision, referencing a similar case (CIT v. Sree Valliappa Textiles) where the penalty was imposed for claiming depreciation without actual use.

2. Justification of Penalty under Section 271(1)(c):
The Assessing Authority imposed a penalty of ?4,88,070 under Section 271(1)(c) for concealment of income and filing inaccurate particulars. The Commissioner of Income Tax (Appeals) set aside the penalty, stating that the assessee had not deliberately concealed income and the Assessing Officer had not sufficiently proven concealment. The Tribunal, however, restored the penalty, arguing that the assessee's withdrawal of the depreciation claim indicated the furnishing of inaccurate particulars.

Court's Analysis and Judgment:
The High Court allowed the appeal, providing a detailed rationale:

Lack of Concealment and Mens Rea:
The Court emphasized that for a penalty under Section 271(1)(c), there must be a conscious concealment or deliberate filing of inaccurate particulars, indicating guilty animus or mens rea. In this case, the assessee had provided all relevant facts and invoices, and the confusion about the place of delivery (Tiruvallur or Pondicherry) did not amount to falsehood. The Court noted that the Pay Loaders were ready for use, which suffices for claiming depreciation under Section 32 of the Act.

Bona Fide Explanation:
The Court highlighted that the assessee's withdrawal of the depreciation claim to avoid litigation did not imply an admission of guilt. The Court referenced several judgments supporting the view that penalties should not be imposed merely for disallowance of claims if the assessee provides a bona fide explanation.

Burden of Proof:
The Court reiterated that the burden of proving concealment or inaccurate particulars lies with the Revenue. The Assessing Authority failed to provide sufficient evidence of guilty animus on the part of the assessee. The Court criticized the imposition of penalties in a casual manner, stressing that penalties should not be automatic and should respect the bona fide explanations provided by taxpayers.

Conclusion:
The High Court set aside the penalty under Section 271(1)(c), ruling in favor of the assessee. The Court ordered that if the penalty had already been recovered, the assessee would be entitled to a refund with interest, in accordance with the law. No order as to costs was made.

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