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Issues Involved:
1. Levy of penalty under section 271(1)(c) of the I.T. Act, 1961 for concealment of income. 2. Disallowance of depreciation on a vehicle for the assessment year 1989-90. Detailed Analysis: 1. Levy of Penalty under Section 271(1)(c) for Concealment of Income: The primary issue revolves around whether the assessee concealed income by making a false claim of depreciation on a newly purchased vehicle. The Assessing Officer initiated penalty proceedings under section 271(1)(c) on the grounds that the vehicle could not have been used for business purposes within the previous year ending on 31-3-1989. The assessee contended that they believed the vehicle was used for business purposes from the time it was purchased and driven from Indore to Coimbatore before 31-3-1989. The CIT(A) upheld the penalty, rejecting the assessee's explanation as not bona fide. The Tribunal considered the assessee's argument that the vehicle was purchased for business purposes and was running for business from Indore to Coimbatore. The Tribunal noted that the assessee became the owner on 30-3-1989 and that the vehicle was running for business purposes during the trip. The Tribunal found that the disallowance of depreciation was based on a legal interpretation rather than a false claim. The Tribunal referred to the Supreme Court's observation in Sir Shadilal Sugar & General Mills Ltd. v. CIT, emphasizing that agreeing to an addition does not imply concealed income. The Tribunal concluded that the assessee's failure to appeal further was due to the possibility of claiming full depreciation in subsequent years, not an admission of concealment. 2. Disallowance of Depreciation on the Vehicle: The Assessing Officer disallowed the depreciation claim, arguing the vehicle was not used for business purposes before 31-3-1989. The CIT(A) supported this view, noting the vehicle was not ready for use and the assessee could not provide details of the hire charges. The Tribunal, however, considered the broader interpretation of "used for the purpose of the business," which includes passive use. The Tribunal cited Kerala High Court's decision in Geo Tech Construction Corpn., which allowed depreciation for assets kept ready for use. The Tribunal found that the assessee's claim was based on a legal interpretation that the vehicle was running for business purposes during the trip from Indore to Coimbatore. The Tribunal emphasized that the assessee had disclosed all relevant facts and that the claim's rejection was a legal disagreement rather than a false claim. The Tribunal referred to the Full Bench of the Kerala High Court in CIT v. India Sea Foods, which held that penalty requires conscious concealment of income. The Tribunal concluded that the assessee's claim did not arise from fraud, gross, or willful neglect and thus did not attract penalty under section 271(1)(c). Conclusion: The Tribunal reversed the CIT(A)'s order, canceling the penalty levied under section 271(1)(c). The Tribunal held that the assessee's claim for depreciation was a bona fide legal contention, not a false claim, and thus did not constitute concealment of income. The appeal by the assessee was allowed.
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