2014 (8) TMI 806 - AT - Income Tax

Penalty u/s 271(1)(c) - Claim of depreciation Computation of book profits u/s 115JB - Held that - Even though there was withdrawal of depreciation claimed, it has no effect on the tax computation as the AO determined the tax under the provisions of section 115JB - assessee admitted incomes u/s 115JB - CIT vs. M/s. Nalwa Sons Investment Ltd. 2012 (5) TMI 150 - SUPREME COURT OF INDIA - penalty u/s 271(1)(c) is not warranted when incomes were accepted u/s 115JB while additions are made in the regular computation - when the computation was made u/s 115JB, the concealment had no role to play and was totally irrelevant - the concealment did not lead to tax evasion at all - penalty could not have been imposed even in respect of the false claim of depreciation made by the assessee - When computation of income was made u/s 115JB, and there was loss under the normal provisions, concealment, if any, did not lead to tax evasion at all and penalty u/s 271(1)(c) could not be imposed - The principles indicated that the withdrawal of a claim in survey proceedings does not attract penalty u/s 271(1)(c) - assessee has bonafide explanation and the assessee tax computation was determined by the AO u/s 115JB, there is no scope for levy of penalty u/s 271(1)(c) Decided in favour of Assessee.

Summary

Issues:
Penalty under section 271(1)(c) of the I.T. Act, 1961 for false claim of depreciation.

Detailed Analysis:

Issue 1: Claim of Depreciation and Penalty Imposition
The assessee, engaged in drug manufacturing, claimed depreciation on units not put to use, leading to penalty proceedings under section 271(1)(c). The Assessing Officer (A.O.) initiated penalty proceedings due to the withdrawal of the depreciation claim after a survey operation. The Ld. CIT(A) confirmed the penalty, rejecting the assessee's contention of bonafide claim and absence of tax evasion. The assessee argued that the claim was genuine, as units were ready for use, and the withdrawal did not warrant a penalty. The Ld. Counsel reiterated the bonafide nature of the claim, emphasizing that withdrawal during survey proceedings does not imply income concealment.

Issue 2: Judicial Precedents and Legal Interpretation
The Learned D.R. argued that the withdrawal of the depreciation claim rendered it bogus, citing legal precedents like Dayabhai Girdharbhai vs. CIT and Ravi & Co. vs. ACIT. However, the Tribunal analyzed the facts and legal provisions, emphasizing that the withdrawal of the claim did not impact the tax computation under section 115JB. Referring to the decision in CIT vs. M/s. Nalwa Sons Investment Ltd., the Tribunal highlighted that concealment without affecting tax evasion does not warrant penalty under section 271(1)(c). The Tribunal also cited cases like DCIT vs. Bhanwar Lal Mahendra Kumar Soni and Godavari Townships P. Ltd. vs. DCIT, indicating that a genuine explanation and tax computation under section 115JB negate the need for penalty.

Conclusion:
The Tribunal, after detailed analysis, concluded that the withdrawal of the depreciation claim during survey proceedings did not merit a penalty under section 271(1)(c). Citing legal precedents and the specific tax computation under section 115JB, the Tribunal ruled in favor of the assessee, allowing the appeal and canceling the penalty. The decision was pronounced on 13.08.2014 by the Appellate Tribunal ITAT Hyderabad, setting aside the penalty imposed under section 271(1)(c) of the I.T. Act, 1961.