1990 (2) TMI 145 - AT - Income Tax

Summary

Issues Involved:
1. Penalty under section 271(1)(c) of the Income-tax Act, 1961.
2. Depreciation and investment allowance claims on machinery not installed.
3. Alleged concealment of income and furnishing inaccurate particulars.
4. Assessment and penalty proceedings.

Detailed Analysis:

1. Penalty under section 271(1)(c) of the Income-tax Act, 1961:
The primary issue in this case revolves around the imposition of a penalty of Rs. 2,38,832 under section 271(1)(c) of the Income-tax Act, 1961. The penalty was levied by the IAC (Assessment) for the appellant's alleged deliberate and intentional false claim of depreciation, investment allowance, and erection charges totaling Rs. 3,54,980. The CIT (Appeals) confirmed this penalty, leading to the present appeal.

2. Depreciation and investment allowance claims on machinery not installed:
The appellant, a private limited company running a spinning mill, claimed depreciation and investment allowance for three items of machinery purchased during the accounting year ending 31-3-1980. The machinery included:
- Lakshmi Reiter Can feed speed frame: Rs. 3,47,167
- Textool High Speed R.T. Cone Winding Machine: Rs. 1,85,417
- 2 Nos. High Speed Draw Frames from Lakshmi Machine Works: Rs. 2,33,121

The Income-tax Officer disallowed these claims as the machinery was not installed during the accounting year. The appellant argued that the machinery was invoiced and accounted for in the books, leading to the provision for depreciation and investment allowance. However, the IAC inferred deliberate suppression of income by the appellant.

3. Alleged concealment of income and furnishing inaccurate particulars:
The appellant contended that all facts and figures were furnished before the assessing officer, and no particulars were withheld. The appellant's counsel argued that the claim was made under an erroneous impression of law and was corrected before the assessing officer. The CIT(A) held that the appellant knowingly claimed excessive relief and was aware that the machinery was not commissioned or installed. The CIT(A) concluded that the appellant's admission was not voluntary but due to the relentless enquiries by the ITO.

4. Assessment and penalty proceedings:
The appellant's counsel argued that the claims were statutory allowances and that the machinery was accounted for in the books. The appellant's case was that the claims were made under a bona fide mistake and not with any intention to conceal income. The Tribunal noted that the claims for depreciation and investment allowance were allowed in the next assessment year, indicating that the appellant's claim was not false. The Tribunal found no mens rea on the appellant's part and held that the appellant's case fell within the proviso to Explanation 1 to section 271(1)(c) of the Act.

Conclusion:
The Tribunal concluded that the penalty under section 271(1)(c) was not justified. The appellant's claims were made under a bona fide mistake, and all relevant facts were disclosed. The Tribunal canceled the penalty and allowed the appeal, directing a refund of the penalty amount if already collected.