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TMI Blog2012 (10) TMI 898X X X X Extracts X X X X X X X X Extracts X X X X ..... -7-2012 - SHRI U.B.S. BEDI, AND SHRI K.G. BANSAL, JJ. Assessee by : Shri A.K. Malhotra, CA Revenue by : Shri Vikas K. Suryawanshi, Sr. DR ORDER PER U.B.S. BEDI, JM This appeal of the assessee is directed against the order passed by the CIT (A)- VIII, New Delhi, dated 08.07.2011, relevant to assessment year 2005-06, whereby confirmation of penalty of Rs.1,26,423/- imposed by the Assessing Officer u/s 271(1)(c) of the I.T. Act, 1961 has been challenged. 2. Facts indicate that assessment in this case was completed u/s 143(3) of the Act on 31.12.2007 at a total income of Rs.5,24,12,027 as against the returned income of Rs.5,05,89,567/-. In the assessment, apart from other disallowances on account of deprecation on farm house and commercial flats totaling to Rs.3,45,490/- was made. 3. On appeal, the aforesaid disallowance was sustained by the first appellate authority. Thereafter, the Assessing Officer imposed the impugned penalty vide his order dated 29.3.2010 after giving due opportunity to the assessee. 4. Assessee filed appeal against such imposition of penalty and submitted before first appellate authority that under similar circumstances and on ide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confirmed by the CIT(A). It was strongly pleaded that disallowing of claim cannot attract penalty, while relying upon the ratio in the case of Reliance Petro Products (P) Ltd., 230 CTR 320 (SC), it was pleaded for deletion of the penalty as assessee has not concealed any income nor furnished any inaccurate particulars of income because of material facts were there before the Assessing Officer. Therefore, penalty could not be levied which could be deleted. 7. Ld.DR has relied upon the order of CIT(A) and pleaded for confirmation of the impugned order. 8. We have heard both the sides and gone through the facts of the case, relevant material and the decisions relied upon on behalf of the assessee as well as by the department, as regards penalty levied in respect of amount of excess depreciation on farm house and commercial flats and find that not even a whisper has been made in the penalty order as to which specific particulars were furnished inaccurate or were concealed. The expression 'has concealed the particulars of income' and 'has furnished inaccurate particulars of income' have not been defined either in sect ion 271 or elsewhere in the Act . However, not withstanding the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulars of his income. Explanation 1 to section 271(1)(c) of the Act mentions that where in respect of any facts material to the computation of the total income of any person under the Act , such person fails to offer an explanation or offers an explanation which is found by the AO or the CIT (Appeals) or the Commissioner to be false, or such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then the amount added or disallowed in computing the total income of such person as a result thereof shall for the purpose of clause (c) of sect ion 271(1), be deemed to represent the income in respect of which particulars have been concealed. In other words, the necessary ingredients for attracting Explanation 1 to sect ion 271(1) (c) are that (i) the person fails to offer the explanation, or (ii) he offers the explanation which is found by the AO or the CIT (Appeals) or the Commissioner to be false, or (iii) the person offers explanation which he is not able to substantiate and fails to prove that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not to be initiated, as has been noticed by the Wanchoo Committee, only to harass the assessee. The approach of the Assessing Officer in this behalf must be fair and objective. The term " inaccurate particulars" is not defined. Furnishing of an assessment of value of the property may not by itself be furnishing of inaccurate particulars. Even, if the Explanations are taken recourse to, a finding has to be arrived at having regard to clause (A) of Explanation 1 that the Assessing Officer is required to arrive at a finding that the explanation offered by an assessee, in the event he offers one, was false. He must be found to have failed to prove that such explanation is not only not bona fide but al l the facts relating to the same and material to the income were not disclosed by him. Thus, apart from his explanation being not bona fide, it should have been found as of fact that he has not disclosed all the facts which was material to the computation of his income. 11. In the light of aforesaid observations of the Hon ble Apex Court, what is to be seen in the instant case, is whether the claim for deduction of depreciation made by the assessee was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax. Recently, Hon ble Apex Court in Reliance Petro Products(supra) held that a mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Thus, merely because the assessee had claimed the expenditure in relation to exempt income, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, attract the penalty u/s 271(1)(c) of the Act. In the present case, we are of the opinion that the disallowance of claim for deductions of depreciation, cannot be considered as concealment of income or furnishing inaccurate particulars thereof, especially when all the relevant particulars were disclosed before the AO. The following observations made by the Hon ble Apex Court in the aforesaid case of M/s Reliance Petro Products(supra) are relevant: 10. It was tried to be suggested that Section 14A of the Act specifically excluded the deductions in respect of the expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. It was further pointed out that the dividends from the shares did not form the par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... side." The situation in the present case is still better as no fault has been found with the particulars submitted by the assessee in its Return. 13. In view of the foregoing, we are of the opinion that mere erroneous claim in the absence of any concealment or furnishing of inaccurate particulars, is no ground for levying penalty, especially when there is nothing on record to show that the explanation offered by the assessee was not bona fide or any material particulars were concealed or furnished inaccurate . In these circumstances, we have no hesitation in observing that no penalty is exigible in relation to claim for deduction of excess depreciation on farm house and commercial flats. Therefore, we hold that penalty is not imposable in this case and action of authorities below in imposing/confirming the penalty u/s 271(1)(c) of the Act is neither proper nor justified. As such, while accepting the plea of the assessee, we direct to delete the impugned penalty imposed/confirmed. 14. In view of discussion as held above and in the light of facts and circumstances of the case, we direct and hold accordingly. 15. As a result, the appeal of the assessee gets accepted. Order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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