2014 (1) TMI 549 - AT - Income Tax

Penalty u/s 271(1)(c) - Held that - Wrongful claim of depreciation by the assessee in this case was not a bonafide mistake rather the assessee had claimed the same as a matter of right and even tried to justify his claim of user of property up to ITAT - When the assessee has failed to prove its claim and the same has been found to be wrongfully made by the concerned authorities, then the assessee now has come with stand of onetime bonafide mistake which cannot be accepted - Following CIT vs. Morgan Finvest (P.) Ltd 2012 (12) TMI 457 - DELHI HIGH COURT - In a case where there was complete lack of evidence to show that property was used for the purpose assessee s business and attempts made by assessee showed contrary and the same were indicative of a frivolous claim, penalty u/s 271(1)(c) is leviable - The attempts made by the assessee are indicative of frivolous nature of claim - On perusal of IT returns, it is proved that the property was not put to use during the relevant assessment year - The order of CIT(A) is set aside and the action of AO in levying penalty was confirmed - Decided in favour of Revenue.

Summary

Issues:
Challenge to deletion of penalty for wrong claim of depreciation under section 271(1)(c) of the Income Tax Act.

Analysis:
1. The Revenue appealed against the CIT(A)'s order deleting the penalty of Rs.1,13,80,360/- imposed for a wrong claim of depreciation of Rs.3,09,66,960/- for assessment year 2003-04.
2. The AO disallowed the depreciation claim on office premises, which was upheld by the CIT(A) and ITAT. Penalty proceedings were initiated, but the CIT(A) deleted the penalty stating the claim was bonafide and not to reduce tax liability due to a business loss.
3. The AR argued that despite lack of evidence, the claim was bonafide as the property was used by directors and visitors, citing legal precedents. The DR contended that wrongful claim of depreciation attracts penalty, referring to relevant case law.
4. The AO disallowed the claim due to lack of evidence of business use, confirmed by higher authorities. The AR failed to provide evidence even during the appeal process.
5. The AR's general claims of business use without evidence were insufficient. The claim lacked bonafide intent as the property was not used for business, and the AR's arguments were rejected.
6. The AR claimed the wrong depreciation was a one-time mistake, citing subsequent years' returns without such claims. However, the claim was not accepted as a bonafide mistake, and the lack of evidence indicated a frivolous claim.
7. The CIT(A)'s decision to delete the penalty was set aside, and the Revenue's appeal was allowed, confirming the penalty for furnishing inaccurate particulars by making a wrongful depreciation claim.

This detailed analysis highlights the key legal arguments, evidence, and decisions involved in the judgment regarding the penalty for a wrong claim of depreciation under the Income Tax Act.