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TMI Blog2013 (11) TMI 937X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 271(1)(c) of the Act in respect of addition of Rs. 55,375/- could be imposed. - decided in favor of assessee. Penalty due to claim of additional depreciation - Held that:- Provisions of section 32(1)(iia) are very plain and clear which provide that additional depreciation is allowable in the case of any new machinery or plant which has been acquired and installed after 31st March, 2005. The proviso to section 32(1)(iia) makes it further clear that no deduction on account of additional depreciation shall be allowed in respect of any machinery or plant which, before its installation by the assessee, was used either within or outside India by any other person. In the present case, additional depreciation u/s 32(1)(iia) was claimed by the assessee on the old machinery which was already used by other person and this relevant fact was not disclosed by the assessee in any form in the return of income filed for the year under consideration. The same was revealed as a result of survey followed by scrutiny assessment done by the A.O. and when it was confronted by the A.O. to the assessee, the later had no option but to surrender its claim for additional depreciation - Therefore, penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed as a revenue expenditure and, the Assessing Officer has treated it as a capital expenditure, capitalizing the machinery amount and allowed depreciation there on at Rs. 36,375/-. Your appellant states that the expenses on foreign travel and local travel amounting to Rs. 1,46,308/- were correct and accurate and they were accepted by the officer as expenses but according to him these were capital expenditure and not a revenue expenditure. It is not the case of Assessing Officer that the expenses shown were inaccurate as he had no any other in formation to the contrary. The disallowance made by assessing officer in the assessment order u/s. 143(3) of the Income Tax Act, were solely on account of a mere bona fide mistake and does not involve any concealment or furnishing of inaccurate particulars of Income. "Section 271 (1) (c) applies where the assessee 'has concealed the particulars of his income or furnished inaccurate particulars of such income' The present was not a case of concealment of the Income. As regards the furnishing of inaccurate particulars, no In formation given In the return was found to be Incorrect or inaccurate. The words 'Inaccurate particulars' mean ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es to be deleted. Without prejudice to the above, Reliance is also placed on the decision of ITA T, Chandigarh B. Bench in the case of Dy. CIT v/s. Shahabad Co-op Sugar Mills, wherein the assessee claimed full year's depreciation instead of half year depreciation and it was held to be a bona fide mistake and does not involve any concealment or furnishing of inaccurate particulars of income. 3) Disallowance of claim of depreciation Additional Depreciation of Rs. 17,52,893/- The additional depreciation of Rs. 17,52,893/- is as per books of accounts and verified by Assessing Officer from time to time. The particulars of additional depreciation were accurate and can not be termed as inaccurate and the additions made on this account by the Assessing Officer were on the above amount of Rs. 17,52,893/- and not any other figure that he gathered from the books of accounts and not from any other external source. At the most it was a case of inaccurate claim and was not in tune with the provision of section 32(1)(iia). Since the accountant who had calculated the additional depreciation on machinery had wrongly worked out and was not able to get the certificate in form 3AA from Charter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the appellant had in its return of income submitted all the information! details I evidences in respect of the said claim and no fact or information in respect of the claim was withheld in any manner and there is no intentional concealment of income or filing of the inaccurate particulars of income. 4.2. The AR of the appellant during the course of appellate proceedings further contended that the penalty proceedings u/s. 271(1)(c) of the I.T. Act, 1961, cannot be initiated and imposed for rejection of bona fide explanation of the assessee and even if there is a rejection of the bona fide explanation, it cannot be treated as concealment of income and avoidance of tax. All the facts have been disclosed by the appellant to the department and merely because the appellant's claim was not acceptable to the revenue, cannot lead to the imposition of penalty. To penalize for concealment, there must be a failure on the part of the assessee to disclose the full particulars of his income or particular concealed must be as a result of the assessee's failure to offer an explanation. The AR of the appellant has further argued that any claim mistakenly taken by the auditors cannot be taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction is not voluntary and same has been done only after detection by the department. This act of the appellant proved the Mensrea and further it clearly amounts to accepting the concealment and furnishing of inaccurate particulars of income on the part of the appellant. Had the survey uls.133A not been carried out by the AC, the appellant would have never came out with the surrender of this claim of deduction. The argument of the appellant that the above mistakes have occurred due to the accounting error on the part of the accountant, is not supported by any evidence and therefore cannot take the appellant out of the purview of the penal provisions u/s. 271(1)(c). Aggrieved by the order of the ld. CIT(A) confirming the penalty imposed by the A.O. u/s 271(1)(c), the assessee has preferred this appeal before the Tribunal. 5. The ld. Counsel for the assessee submitted that the penalty in question as imposed by the A.O. and confirmed by the ld. CIT(A) is mainly in respect of addition of Rs. 17,52,893/- made on account of disallowance of additional depreciation claimed by the assessee u/s 32(1)(iia) of the Act. He submitted that there is no dispute about the purchase of machinery ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )(c) of the Act. 7. The ld. D.R., on the other hand, strongly relied on the orders of the authorities below in support of the Revenue's case that the present case of the assessee is a fit case to impose penalty u/s 271(1)(c) of the Act. He submitted that the wrong claim of additional depreciation on machinery was detected out by the A.O. during the course of assessment proceedings and since the assessee had no explanation whatsoever to offer in this regard, he had no option but to accept the disallowance on this issue. He submitted that the required certificate in Form 3AA for claiming the additional depreciation was not filed by the assessee along with the return of income as required by the statute and even the fact that the concerned machinery was old had not indicated by the assessee anywhere in the return of income. He contended that the relevant provisions of the statute in this regard are very clear and the failure of the assessee to indicate anywhere in the return of income the fact that the machinery on which additional depreciation was claimed was not new one but the same was a old machinery clearly shows that it is a case of furnishing inaccurate particulars of its inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act in respect of addition of Rs. 55,375/- could be imposed. 9. As regards the disallowance made on account of foreign/inland travelling expenses amounting to Rs. 1,46,308/-, it is observed that the same was made by the A.O. on the ground that the said expenses being incurred by the assessee in relation to purchase of machinery was capital in nature. The genuineness of the said expenses, however, was neither disputed nor doubted by the A.O. On the other hand, after capitalising the said expenses to machinery account, depreciation thereon was also allowed by the A.O. Having regard to all these facts of the case, we are of the view that the assessee cannot be held guilty of concealment in respect of addition made by way of disallowance of travelling expenses treating the same as capital in nature so as to impose penalty u/s 271(1)(c) of the act. 10. In so far as the claim of the assessee for additional depreciation on machinery amounting to Rs.17,52,892/- is concerned, it is observed that the said claim was made by the assessee as per the provisions of section 32(1)(iia) of the Act. In this regard, it is observed that the provisions of section 32(1)(iia) are very plain and clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled along with the return of income, it was unequivocally stated that the relevant provision made for payment of gratuity was not allowable u/s 40A(8) of the Act and on the basis of these contents of the tax audit, report the Hon'ble Supreme Court held that there was no question of concealing the particulars of income attracting levy of penalty u/s 271(1)(c) of the Act. In the present case, the material fact that the machinery on which the additional depreciation was claimed being old, was not disclosed by the assessee anywhere in the return of income and the same was detected by the A.O. only during the course of assessment proceedings after which the assessee surrendered its claim for additional depreciation in the absence of any explanation whatsoever to offer in this regard.
12. Keeping in view the reasons given above, we sustain the penalty imposed by the A.O. and confirm4ed by the ld. CIT(A) to the extent it is in respect of addition made by way of additional depreciation. The A.O. is accordingly directed to recompute the penalty u/s 271(1)(c) of the Act.
13. In the result, appeal filed by the assessee is partly allowed.
Order pronounced in the open court on 15.3.2013. X X X X Extracts X X X X X X X X Extracts X X X X
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