2012 (11) TMI 318 - AT - Income Tax

Penalty u/s 271(1)(c) - disallowance of depreciation - Held that - The genuineness of the purchase of the machinery has been established by the assessee as sale consideration of the machinery was paid through cheques as evident from the bank statements. In the subsequent years the chart of the depreciation submitted by assessee was stated to be allowed by the Revenue Department - it was not a false claim but an inadvertence claim of depreciation for the year under consideration - as decided in Price Waterhouse Coopers Pvt.Ltd. v/s CIT Kolkata - I 2012 (9) TMI 775 - SUPREME COURT absence of due care does not lead to assessee is guilty of furnishing inaccurate particulars or concealment of income - in favour of assessee. Addition u/s.68 - Held that - If the impugned amount was received in advance and later on it was returned, then the said party ought to be known to the assessee and thus the assessee was under obligation to furnish the identity, creditworthiness and the genuineness of the transaction which was not fulfilled by assessee so it is difficult to hold that the transactions was genuine. Primary onus as prescribed u/s.68 has not been discharged by the assessee, thus it is not the case that merely on presumption an addition has been made and penalty proceedings were invoked - against assessee.

Summary

Issues:
1. Levy of penalty u/s.271(1)(c) for unexplained cash credit u/s.68 and disallowance of depreciation.

Analysis:

1. Levy of Penalty for Disallowance of Depreciation:
The appeal was filed by the Assessee challenging the confirmation of the penalty of Rs.1,50,000 under section 271(1)(c) arising from the order of the ld. CIT(Appeals)-I. The penalty was imposed in respect of unexplained cash credit under section 68 and disallowance of depreciation. The Assessee explained that the advance received in cash from M/s.Harshukhbhai & Co. was returned without goods delivery within the Financial Year. Regarding the disallowance of depreciation, the AO doubted the purchase date and disallowed depreciation, leading to the penalty imposition. The Assessee claimed the depreciation was bona fide supported by a bill and bank statements showing payment through cheques. The Tribunal upheld that the claim was not false but an inadvertent claim, following the law pronounced by the Hon'ble Gujarat High Court and the Supreme Court decision in a relevant case, concluding that the Assessee was not guilty of concealment under section 271(1)(c) of the IT Act.

2. Levy of Penalty for Unexplained Cash Credit under Section 68:
The penalty was also imposed for unexplained cash credit under section 68. The Assessee failed to provide the identity, creditworthiness, and genuineness of the transaction of the party involved, despite sufficient opportunity. The Tribunal noted that the primary onus as prescribed under section 68 of the IT Act was not discharged by the Assessee, and the transactions could not be considered genuine. The Tribunal distinguished the present case from the case laws cited by the Assessee and affirmed the penalty up to the amount taxed under section 68 of the IT Act. Consequently, the appeal of the Assessee was partly allowed, upholding the penalty levied for unexplained cash credit under section 68 while setting aside the penalty for disallowance of depreciation.