2023 (10) TMI 556 - AT - Income Tax

Penalty u/s 271(1)(c) - Additional depreciation on replacement of machinery - Claim denied as additional depreciation is eligible only for the new plant and machinery and not on the replacement of parts of the machinery - difference of opinion as to whether the additional depreciation is allowable on replacement of parts of machinery or not? - HELD THAT - As decided in the case of Reliance Petro Product 2010 (3) TMI 80 - SUPREME COURT held that mere making a claim which is not sustainable in law by itself will not amount to furnishing of inaccurate particulars regarding the income of the assessee. Here is a case where the assessee made a conscious claim and has given a bonafide explanation before AO as well as CIT (Appeals). Simply because the claim of the assessee is not sustained by the authorities, it cannot be held that the assessee has furnished inaccurate particulars of income so as to attract the penalty u/s 271(1)(c) - In the circumstances the Assessing Officer is directed to delete the penalty levied u/s 271(1)(c) - Appeals of the assessee are allowed.

Summary

Issues involved:
The judgment involves appeals filed by the assessee against penalty levied under section 271(1)(c) of the Income Tax Act, 1961 for assessment years 2011-12, 2013-14, and 2015-16. The main issue revolves around whether the assessee furnished inaccurate particulars of income by making certain claims related to depreciation and whether the penalty imposed is justified.

Assessment of Additional Depreciation:
The assessee, engaged in the business of cement manufacturing, claimed additional depreciation on replacement of plant and machinery parts, which was denied by the Assessing Officer. The dispute centered on whether additional depreciation is allowed only on new plant and machinery or also on replacement parts. The Tribunal upheld the Assessing Officer's decision. The assessee contended that the claim was made based on legal precedents and that full disclosure was made, arguing that the penalty should be set aside under Explanation 1 to Section 271(1) of the Act. The Hon'ble Supreme Court's ruling in CIT Vs. Reliance Petro Product was cited to support the argument that a claim not sustained in law does not amount to furnishing inaccurate particulars of income. Consequently, the penalty was directed to be deleted for all three assessment years.

Treatment of Assets as Plant and Machinery:
Another issue arose regarding the classification of assets like coal sheds and GI sheets as part of plant and machinery or as building assets. The Assessing Officer restricted the depreciation based on treating these assets as building other than residential, which was contested by the assessee. The disagreement between the authorities and the assessee was deemed a difference of opinion rather than deliberate misrepresentation. The Tribunal ruled in favor of the assessee, emphasizing that a conscious claim, even if not sustained, does not amount to furnishing inaccurate particulars of income for penalty purposes.

Concluding Decision:
The judgment allowed the appeals of the assessee, directing the deletion of the penalty imposed under section 271(1)(c) of the Act for all three assessment years. The decision highlighted the importance of bona fide explanations and the absence of deliberate misrepresentation in the assessee's claims, as supported by legal precedents.