2018 (6) TMI 421 - HC - Income Tax

Penalty u/s 271(1)(c) - depreciation on assets given on sale and lease back basis - Held that - The claim made by the respondent assessee was bonafide and not in the face of a statutory provision or any binding decision. In fact, the issue raised herein stands covered in favour of the respondent assessee by the decision of the Apex Court in Reliance Petroproducts Pvt. Ltd. (2010 (3) TMI 80 - SUPREME COURT) where it has been observed that making of incorrect claim in law would not by itself amount to concealment of income or giving inaccurate particulars of income. The words concealment or giving inaccurate particulars of income have to be read strictly before the penalty provisions under Section 271(1)(c) of the Act can be invoked. In the present facts, the Revenue has not been able to show even remotely that there is any concealment of income or filing of inaccurate particulars of income. - Decided in favour of assessee.

Issues:
Challenge to common order of Income Tax Appellate Tribunal under Section 260A for Assessment Years 199596, 199697, and 199798. Revenue's appeal against deletion of penalty under Section 271(1)(c) of the Income Tax Act.

Analysis:
1. The appeals challenge the Tribunal's order allowing depreciation claimed by the assessee on assets used in "sale and lease back" transactions, following the Supreme Court's decision in ICDS Ltd. Vs. Commissioner of Income Tax. The Revenue appealed against this decision, questioning the justification for allowing depreciation on financial transactions.

2. The Revenue imposed penalties under Section 271(1)(c) for the mentioned assessment years, citing the Delhi High Court's decision in Commissioner of Income Tax Vs. Zoom Communication Pvt. Ltd. However, the Tribunal, in its order dated 19th March, 2015, deleted the penalties based on its earlier decision in quantum proceedings allowing the depreciation claim. The Tribunal emphasized that a mere rejection of a claim does not automatically lead to penalty under Section 271(1)(c) unless there is concealment or furnishing of inaccurate particulars of income.

3. The High Court noted that the Revenue failed to show any concealment or inaccurate particulars of income by the assessee in its orders imposing penalties. The absence of specific details regarding the alleged concealment or inaccuracy led the Court to reject the Revenue's appeal, citing the need for the Revenue to be satisfied of such misconduct before imposing penalties.

4. The Court highlighted that during the relevant assessment years, the legal position on claiming depreciation for assets in sale and lease back transactions was unclear until the Supreme Court's decision. As the claim was debatable and not in violation of any clear provision or court decision, the Court found the assessee's claim to be bona fide, distinguishing it from cases where penalties were upheld due to inaccurate claims made without foundation.

5. Relying on the decision in Reliance Petroproducts Pvt. Ltd., the Court emphasized that penalties under Section 271(1)(c) require a strict interpretation of concealment or inaccurate particulars of income. Since the Revenue failed to demonstrate any concealment or inaccuracy in the assessee's claim, the Court dismissed the appeals, concluding that the question raised did not give rise to any substantial legal issue.

6. In the absence of evidence of deliberate concealment or provision of inaccurate particulars of income, the Court upheld the Tribunal's decision to delete the penalties, emphasizing the need for concrete proof of misconduct before imposing penalties under Section 271(1)(c) of the Income Tax Act.

7. The Court's ruling underscores the importance of establishing deliberate concealment or furnishing of inaccurate particulars of income before penalizing taxpayers, especially in cases where legal interpretations are debatable, and claims are made in good faith without violating clear statutory provisions or court decisions.

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