2016 (7) TMI 736 - AT - Income Tax

Rectification of mistake - Penalty u/s 271(1)(c) - claim of depreciation on Temporary Wooden structures like interiors, glow signs etc; taken over from Erstwhile GTB upon amalgamation pursuant to GOI notification @ 100% - Held that - In assessee s own case, it is observed that the order passed u/s 154 of the Act date 30.11.2007 has been quashed by this Tribunal. This Tribunal has observed that the issue relating to depreciation is a debatable issue as it requires examination of details and cannot be rectified u/s 154 of the Act. As the order under which disallowance of depreciation was made, stands cancelled by this Tribunal, the penalty proceedings initiated in respect of the same cannot be sustained. We accordingly quash the penalty order passed by the Assessing Officer. - Decided in favour of assessee.

Summary

Issues:
1. Penalty under section 271(1)(c) on claim of depreciation on temporary wooden structures.
2. Reduction of penalty imposed under section 271(1)(c) on account of wrong claim of brought forward losses/unabsorbed depreciation.

Issue 1: Penalty under section 271(1)(c) on claim of depreciation on temporary wooden structures:

The Appellate Tribunal considered cross-appeals filed by the assessee and the Revenue against the order passed by the Ld. CIT(A) for the Assessment Year 2005-06. The primary contention was the imposition of a penalty under section 271(1)(c) on the claim of depreciation on temporary wooden structures taken over from a bank upon amalgamation. The assessee argued that the explanation provided was supported by facts, legal provisions, and the scheme of amalgamation approved by the Government of India and RBI. The Tribunal referred to a previous order in the quantum appeal where it was held that the depreciation rate of 100% should be allowed on the interiors of the bank, which were purely wooden structures. The Tribunal quashed the order passed under section 154 of the Act, which disallowed the depreciation claim, stating that the issue of depreciation rate was debatable and required detailed examination. Consequently, the penalty proceedings initiated based on the disallowed depreciation claim were quashed by the Tribunal.

Issue 2: Reduction of penalty imposed under section 271(1)(c) on account of wrong claim of brought forward losses/unabsorbed depreciation:

In the second appeal, the Revenue challenged the reduction of penalty imposed under section 271(1)(c) in relation to the disallowed claim of depreciation on furniture and fixtures. The Ld. CIT(A) held that the disallowance of excess setoff of losses could not be considered as concealment of income particulars or furnishing inaccurate particulars of income by the assessee. The Revenue contended that since the addition had been confirmed by the first appellate authority under section 143(3) of the Act, the penalty should be upheld. However, the Ld. CIT(A) maintained that the disallowance was due to additions made in the hands of the assessee and did not amount to concealment or inaccurate particulars of income. The Tribunal agreed with the Ld. CIT(A) and dismissed the Revenue's appeal, emphasizing that the disallowance could not be a basis for imposing a penalty.

In conclusion, the Appellate Tribunal ruled in favor of the assessee in both appeals, quashing the penalty imposed under section 271(1)(c) in the first issue and dismissing the Revenue's appeal in the second issue. The judgments were pronounced on 10th June 2016 by the Appellate Tribunal ITAT Delhi.