2021 (3) TMI 260 - AT - Income Tax

Penalty u/s 271(1)(c) - excess depreciation claim on plant and machinery u/s.32(1)(iia) - disallowance of claim as appellant has started production only in the current year and therefore the assessee cannot be said to have been already engaged in the business of manufacturing - HELD THAT - While deciding the matter in favour of the assessee the Ld. Tribunal in M/S CERA SANITARYWARE LTD. VERSUS ACIT (OSD) , RANGE-1, AHMEDABAD 2017 (1) TMI 390 - ITAT AHMEDABAD limited company declaring total income of ₹ 11.43 Crores approx. and having no mens rea of claiming excess depreciation of just ₹ 7,80,826/-, rather it was claimed in regular course with the firm belief that it is legally allowable which was further supported by statutory Audit Report and therefore, imposition of penalty is unjustified. The A.O. decided the matter against the assessee on the contention that depreciation can be allowed on the show room building as it could not be deemed to be put to use on 05.03.2007 as claimed by the assessee but was put to use on 31.05.2007 after the completion of Bath Studio. On that premises the penalty imposed u/s.271(1)(c) of the Act was declared to be unjustified as the assessee has only committed an undoubtful bona fide error without having any intention of concealment of income or furnishing inaccurate particulars of income. Thus relying on the same ratio when there was full disclosure of the claim made by the assessee in the case in hand certified by the Chartered Accountant penalty is not justified merely on the ground of rejection of claim on merit and, thus, quashing of penalty by the Ld.CIT (A), in our considered opinion, is just and proper so as to warrant inference. Decided against revenue.

Summary

Issues:
1. Appeal against penalty order under section 271(1)(c) of the Income Tax Act, 1961 for Assessment Year 2011-2012.

Analysis:
The Revenue initiated penalty proceedings against the assessee for furnishing inaccurate particulars of income, culminating in a penalty order of ?6,13,84,278. The assessee contended that the penalty was levied on the charge of concealment of income, not inaccurate particulars, and argued that disallowance of additional depreciation does not imply concealment. The Assessing Officer (AO) justified the penalty citing the strict liability of the assessee under section 271(1)(c) and the deeming provisions of Explanation 1. The AO concluded that the assessee concealed income of ?18,47,95,000, imposing a penalty of ?6,13,84,278. However, the Tribunal observed that the claim for additional depreciation was made in good faith and supported by the Tax Audit Report, leading to the quashing of the penalty by the Commissioner of Income Tax (Appeals) based on precedents and the absence of any intention to conceal income.

The Tribunal emphasized that the assessee's disclosure of the claim, certified by a Chartered Accountant, did not amount to concealment, as making an incorrect claim does not necessarily imply concealment. Relying on relevant case laws, including the decision in the case of Geeta Prints Pvt. Ltd., the Tribunal held that the rejection of the claim on merit does not justify imposing a penalty under section 271(1)(c). The Tribunal also cited the decision in the case of Reliance Petroproducts (P.) Ltd. to support the view that incorrect claims do not constitute concealment of income. The Tribunal concluded that the penalty was unjustified, as the assessee acted in good faith without any intention to conceal income or furnish inaccurate particulars.

In another case cited by the Tribunal, it was noted that the assessee, a limited company, had no intention to conceal income while claiming depreciation. The Tribunal found that the penalty imposed was unwarranted, as the assessee made a bona fide error without any intent to conceal income. The Tribunal upheld the decision of the Commissioner of Income Tax (Appeals) to quash the penalty, emphasizing that full disclosure of the claim by the assessee, supported by a Chartered Accountant's certification, did not justify the imposition of a penalty under section 271(1)(c).

In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the decision to quash the penalty imposed on the assessee for the Assessment Year 2011-2012.