2014 (12) TMI 639 - HC - Income Tax

Deletion of penalty u/s 271(1)(c) - Assessee concealed particulars of income or not - claim of depreciation on assets transferred to Government of Rajasthan for the first time during the previous year - Held that - The Tribunal rightly deleted the penalty and allowed the relief as the assets were brought into the books of accounts and details of all assets were provided and therefore it cannot be said that the depreciation was claimed wrongly by the assessee so as to be subjected with penalty u/s 271(1)(c) - merely because title has not been transferred or properties not registered in the name of the assessee under the Indian Registration Act, depreciation cannot be disallowed - possession and user is of the assessee in assessee s own case as decided in Commissioner of Income Tax Jaipur-II Vs. M/s. Jawahar Kala Kendra 2014 (6) TMI 292 - RAJASTHAN HIGH COURT the finding of the Tribunal for allowing depreciation to the assessee is upheld - the claim of depreciation was allowable and as such it cannot be said that the claim made by the assessee was wrong or inadmissible since beginning - merely because the assessee did not challenge further, is no reason to come to the conclusion that assessee is to be visited with penalty thus, the order of the Tribunal is upheld and the assessee neither concealed income nor furnished inaccurate particulars of income, therefore penalty cannot be levied Decided against revenue.

Summary

Issues:
1. Appeal against deletion of penalty u/s 271(1)(c) of the IT Act by ITAT.

Analysis:
The judgment pertains to an appeal under Section 260-A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal (ITAT) regarding the deletion of penalty u/s 271(1)(c) for the assessment year 2005-06. The respondent-assessee, a cultural society, claimed depreciation on assets transferred to it by the Government of Rajasthan. The controversy arose as the ownership transfer was not adequately evidenced, leading to disallowance of depreciation by the Assessing Officer (AO). The Commissioner of Income Tax (Appeals) partly allowed the claim, but a penalty was imposed u/s 271(1)(c) based on the disallowed depreciation amount.

The penalty was upheld by the CIT(A) on the grounds of prima facie inadmissible claim of depreciation. However, the Tribunal, in its impugned order, deleted the penalty, emphasizing that the assets were duly disclosed, and the depreciation claim was not wrongful. The Tribunal noted that possession and use of the assets were with the assessee-society, even though the title deed was not transferred. The High Court concurred with the Tribunal's decision, highlighting that possession by the assessee was crucial, and previous judgments supported the allowance of depreciation based on possession and usage, rather than just title ownership.

The Court dismissed the Revenue's contention that the Tribunal's decision was unjustified, emphasizing that possession and usage by the assessee were sufficient for depreciation claim. The Court referenced its previous judgment in a similar case where depreciation was allowed, further supporting the assessee's position. The Court concluded that the Tribunal's decision was based on evidence and facts on record, finding no grounds for interference. As a result, the appeal was dismissed, affirming the deletion of the penalty by the ITAT.