1990 (2) TMI 148 - AT - Income Tax

Summary

Issues Involved:
1. Legitimacy of the penalty levied under Section 271(1)(c) of the IT Act, 1961.
2. Whether the appellant company deliberately made false claims for depreciation and investment allowance.
3. Consideration of the appellant's explanation and conduct during the assessment proceedings.
4. Applicability of legal precedents and interpretations of "concealment of income" and "furnishing inaccurate particulars."

Issue-wise Detailed Analysis:

1. Legitimacy of the penalty levied under Section 271(1)(c) of the IT Act, 1961:
The appeal challenges the order of the CIT(A) confirming a penalty of Rs. 2,38,832 under Section 271(1)(c) of the IT Act, 1961. The penalty was imposed for the alleged concealment of income by making claims for depreciation and investment allowance on machinery not installed during the accounting year. The ITO had disallowed these claims and initiated penalty proceedings, which were later confirmed by the IAC and CIT(A).

2. Whether the appellant company deliberately made false claims for depreciation and investment allowance:
The appellant, a private limited company running a spinning mill, had claimed depreciation and investment allowance for three items of machinery in its return for the assessment year 1980-81. The ITO found that the machinery was not installed during the accounting year and disallowed the claims, determining the total income at Rs. 5,39,390. The IAC imposed the penalty, asserting that the appellant had deliberately made false claims. The CIT(A) supported this view, noting that the machinery was not commissioned or installed by the end of the accounting year. The CIT(A) concluded that the appellant was aware of this fact when filing the return and had claimed excessive relief knowingly.

3. Consideration of the appellant's explanation and conduct during the assessment proceedings:
The appellant argued that all facts and figures were disclosed to the assessing officer and that the claims were made based on accounting entries. The appellant's counsel contended that the claims were made under an erroneous view of the law and were corrected upon realization. The CIT(A) found that the appellant admitted the mistake only after detailed inquiries by the ITO, indicating that the surrender of the claims was not voluntary. The Tribunal, however, noted that the appellant had placed all materials before the authorities and had not withheld any particulars. The Tribunal observed that the appellant's claims were allowed in the subsequent assessment year, indicating no intention to conceal income.

4. Applicability of legal precedents and interpretations of "concealment of income" and "furnishing inaccurate particulars":
The appellant relied on several legal precedents, including decisions from the Madras High Court and the Supreme Court, to argue that disallowance of a claim does not automatically imply furnishing inaccurate particulars. The Tribunal agreed, citing the Supreme Court's decision in Sir Shadilal Sugar & General Mills Ltd. vs. CIT, which held that agreeing to disallowances does not necessarily indicate deliberate concealment. The Tribunal also referenced the Delhi High Court's decision in Addl. CIT vs. Delhi Cloth & General Mills Co. Ltd., which stated that disallowance of expenditure claims does not infer inaccurate particulars. The Tribunal concluded that the appellant's case fell within the proviso to Explanation 1 to Section 271(1)(c), as the explanation was bona fide and all relevant facts were disclosed.

Conclusion:
The Tribunal found that there was no deliberate intention to conceal income or furnish inaccurate particulars by the appellant. The claims for depreciation and investment allowance were made under a bona fide mistake and were corrected upon realization. The Tribunal held that the penalty under Section 271(1)(c) was not justified and ordered its cancellation, directing a refund of the penalty amount if already collected. The appeal was allowed.