2022 (12) TMI 878 - AT - Income Tax

Penalty us/ 271(1)(c) - assessee understated its income by claiming excessive depreciation on dumpers, tata 207, truck, excavator, drilling machine water Tank - HELD THAT - Penalty confirmed by the ld. CIT(A) holding that the assessee had deliberately and intentionally not disclosed the true and correct income and had furnished inaccurate particulars of income with the intention to evade tax. Thus the ld. CIT(A) sustained the penalty u/s 271(1)(c) of the Act. The Bench has gone through the entire case of the assessee but found that the assessee could neither substantiate its case nor controvert the findings of the lower authorities. In this situation, we have no other alternative except to concur with the findings of the ld. CIT(A). Thus the appeal of the assessee is dismissed

Issues Involved:
1. Legality and justification of penalty levied under Section 271(1)(c) of the Income Tax Act, 1961.
2. Assessment of whether the assessee furnished inaccurate particulars of income by claiming excessive depreciation.

Issue-Wise Detailed Analysis:

1. Legality and Justification of Penalty under Section 271(1)(c):

The primary issue in this case is whether the penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961, amounting to Rs. 7,74,020/-, is justified. The penalty was levied on the grounds that the assessee furnished inaccurate particulars of income by claiming excessive depreciation.

The assessee's appeal against the penalty was dismissed by the ld. CIT(A), who upheld the penalty by observing that the assessee had deliberately and intentionally not disclosed the true and correct income. The CIT(A) relied on the provisions of Explanation 1 to Section 271(1)(c), which raises a presumption that any amount added or disallowed in computing the total income shall be deemed to represent the income in respect of which particulars have been concealed unless the assessee substantiates the explanation and proves that such an explanation was bona fide.

The CIT(A) also cited various judicial precedents, including the Delhi High Court's decision in CIT Vs. Gurbachan Lal, the Supreme Court's affirmation of the Kerala High Court's decision in CIT Vs. K.P. Madhusudan, and the case of MAK Data (P) Ltd. v. CIT-II, to support the imposition of the penalty. The CIT(A) emphasized that the onus is on the assessee to offer an explanation and substantiate it with relevant material, failing which the presumption of concealment stands.

2. Assessment of Inaccurate Particulars of Income by Claiming Excessive Depreciation:

The second issue revolves around whether the assessee furnished inaccurate particulars of income by claiming excessive depreciation on various assets, including dumpers, Tata 207, truck, excavator, drilling machine, and water tank.

During the assessment proceedings, the AO observed that the assessee, engaged in the business activity of contractor ship of JCB machines and dumpers for civil construction work, had actually engaged in the job work of blasting and transportation of stones. The assessee claimed 30% depreciation on the assets instead of the allowable 15%, thereby understating the income by Rs. 22,77,188/-. Consequently, the AO initiated penalty proceedings under Section 271(1)(c) and levied a penalty of Rs. 7,74,020/-.

The assessee contended that the higher rate of depreciation was claimed as the vehicles were used for hire when idle, thus qualifying for the higher depreciation rate. However, the assessee failed to substantiate this claim with concrete evidence or rebut the findings of the AO and CIT(A).

The Tribunal, after considering the written submission and the case laws cited by the assessee, found that the assessee could neither substantiate its case nor controvert the findings of the lower authorities. The Tribunal concurred with the findings of the CIT(A) that the assessee had furnished inaccurate particulars of income with the intention to evade tax, thereby justifying the penalty under Section 271(1)(c).

Conclusion:

The appeal of the assessee was dismissed, and the penalty of Rs. 7,74,020/- under Section 271(1)(c) was upheld. The Tribunal concluded that the assessee had deliberately furnished inaccurate particulars of income by claiming excessive depreciation, thereby justifying the penalty imposed by the AO and confirmed by the CIT(A). The Tribunal emphasized the importance of substantiating claims with relevant evidence and the onus on the assessee to prove the bona fides of the explanation provided.

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