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2017 (11) TMI 448 - AT - Income TaxPenalty u/s 271(1)(c) - claim of depreciation on the co-generation plant by the assessee at a rate of 100% - Held that - In the case of the present assessee the revenue in itself appreciating that the raising of a claim of depreciation on the co-generation plant by the assessee at a rate of 100% as against the rate 80% to which it stood statutorily entitled was a bonafide mistake, had thus on the said count not even initiated any such penalty proceedings in the hands of the assessee for the immediate preceding year, viz. A.Y. 2003-04. Still further, we find that the assessee had during the course of the assessment proceedings on realizing its mistake had revised the depreciation rate on the co-generation plant from 100% to 80%. We thus are of the considered view that the raising of the wrong claim of depreciation by the assessee in the present case safely falls beyond the sweep of a False claim , as a result whereof the aforesaid judicial pronouncements relied upon by the ld. D.R are clearly found to be distinguishable on facts, as against those involved in the case of the present assessee. We thus after deliberating at length on the well reasoned order of the CIT(A), find to be in agreement with the view taken by him. - Decided against revenue.
Issues Involved:
1. Whether the CIT(A) was correct in deleting the penalty imposed by the A.O under Section 271(1)(c) for furnishing inaccurate particulars of income. 2. Whether the assessee's claim of 100% depreciation on the co-generation plant, instead of the allowable 80%, was a bonafide mistake or a deliberate act warranting penalty. 3. Whether the penalty proceedings were validly initiated and sustained by the A.O. Issue-wise Detailed Analysis: 1. Deletion of Penalty by CIT(A): The CIT(A) deleted the penalty imposed by the A.O under Section 271(1)(c), concluding that the higher claim of depreciation by the assessee was a wrong claim rather than furnishing inaccurate particulars of income. The CIT(A) noted that the details of assets and their written down value were correctly furnished, and the mistake was in the rate of depreciation applied. The CIT(A) relied on the judgment of the Hon’ble Supreme Court in the case of CIT Vs. Reliance Petro Product Pvt. Ltd. (2010) 322 ITR 158 (SC), which held that making a wrong claim does not amount to furnishing inaccurate particulars if the details provided are correct. The CIT(A) also observed that in the preceding year, no penalty was levied for a similar mistake. 2. Bonafide Mistake vs. Deliberate Act: The A.O argued that the assessee, being supported by trained accountants and legal professionals, could not claim ignorance of the law as a defense. The A.O noted that the assessee had acknowledged the mistake of claiming 100% depreciation in the preceding year (AY: 2003-04) and revised it to 80%. However, the same mistake was repeated in the subsequent year (AY: 2004-05). The A.O imposed a penalty of ?3,23,89,211/- (later reduced to ?1,45,96,094/-) for furnishing inaccurate particulars of income. The CIT(A) disagreed, considering the mistake as genuine and not warranting penalty under Section 271(1)(c). 3. Validity of Penalty Proceedings: The assessee contended that the penalty proceedings were not validly initiated as the show cause notice did not specify the default. The A.O had initiated penalty proceedings under ‘Explanation 1’ of Section 271(1)(c), which was not applicable for furnishing inaccurate particulars. The CIT(A) found that the penalty was not justified as the wrong claim of depreciation was a bonafide mistake, and the details were correctly furnished. The Tribunal upheld the CIT(A)’s order, noting that the assessee had revised the depreciation claim during the assessment proceedings and that the mistake was not deliberate. Conclusion: The Tribunal dismissed the revenue's appeal, agreeing with the CIT(A) that the higher claim of depreciation was a bonafide mistake and not furnishing inaccurate particulars of income. The Tribunal held that the penalty under Section 271(1)(c) was not justified, as the details were correctly furnished, and merely making a wrong claim does not attract penalty. The Tribunal also noted that similar mistakes in the preceding year did not attract penalty, reinforcing the bonafide nature of the mistake. The penalty proceedings were thus not sustained, and the CIT(A)’s order was upheld.
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