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TMI Blog2019 (3) TMI 1003X X X X Extracts X X X X X X X X Extracts X X X X ..... g up of the claim of depreciation could not automatically entail the penalty under Section 271(1)(c) of the Act. The imposition of penalty is neither automatic nor is expected to be imposed even if the bona fide explanation of the assessee is not finally accepted by the statutory authorities of the Act. The burden of proving the guilty animus on the part of the assessee is on the Revenue, like on Prosecution in criminal cases and no such negative burden could be cast upon by the assessee himself. No material on record brought by A which would indicate, much less, prove the guilty animus on the part of the assessee in the present case. Therefore, the restoration of penalty in the present case by the Second Appellate Authority, Tribunal, should fall to the ground. - Decided in favour of assessee. - Tax Case Appeal No.120 of 2009 - - - Dated:- 7-2-2019 - Dr. Justice Vineet Kothari And Mr. Justice C.V. Karthikeyan For the Appellant : Mr.Kaushik For Mr.S.Sridhar For the Respondent : Ms.Premalatha Junior Standing Coun JUDGMENT DR.VINEET KOTHARI, J . The assessee has filed this appeal under Section 260A of the Act, aggrieved by the order of the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preciation in question. In the said penalty order, the Assessing Authority observed in paragraph 12 of the order that there was a conscious concealment on the part of the assessee and the assessee had intention to defraud the revenue by making false depreciation claim and therefore, the penalty in question was leviable. 5. The first Appellate Authority, Commissioner of Income Tax (Appeals), however, set aside the said penalty by his order dated 18.8.2004 with the following observations: The appellant is having a proprietary concern. He was present at the time of hearing. He stated that he is not looking into each and every transaction of the business as he had his own employees for that. Concerning the delivery, he stated that the vehicle was taken delivery at Tiruvellore because it appears that when this survey operation took place, the vehicles were being delivered at Tiruvellore and immediately he could not recollect the place of delivery. Whenever questions are asked, he had taken the help of his auditors or employees to answer the questions. That suggests that each and every particular fact was not in his immediate knowledge. The appellant further stated that he had su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... offence as contemplated under section 271(1)(c) and propounded by various High Courts had not been satisfied to impose penalty in this case under section 271(1)(c). The penalty of ₹ 4,88,070/- levied by the assessing officer is therefore cancelled. In the result, the appeal is allowed. 6. The Revenue took up the matter further before the Tribunal, which allowed the appeal of Revenue and restored the said penalty with the following observations: We also find that under similar circumstances, when the Assessee has claimed depreciation on the basis of factory manager's certificate that machinery had been received before the close of the year and later on the claim for depreciation was withdrawn, still penalty was held to be leviable by the decision of the Hon'ble Karnataka High Court in the case of CIT v. Sree Valliappa Textiles (supra). In that case, the High Court has held that: The Tribunal failed to notice that when the claim was made on the basis of installation, the machinery had not even left the premises of the seller. The defence of the factory manager could not have been considered. The Assessee was bound by the act of its servants. Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The learned counsel urged that though the depreciation could have been allowed even if the plant and machinery, namely three Pay Loaders in question were not actually used and even if they were ready to use or kept ready for use, as per the judgments supra, the assessee was entitled to claim deduction under Section 32 of the Act and merely because the assessee gave up his claim to buy peace, it could not automatically entail the imposition of penalty under Section 271(1)(c) of the Act. 10. The learned counsel also submitted that there was no concealment on the part of the assessee or filing of inaccurate particulars, which is a ground for the imposition of penalty under Section 271(1)(c) of the Act. He also relied upon the Division Bench judgment of this Court in Commissioner of Income Tax v. Gem Granites (Karnataka) [(2014) 42 taxmann.com 493 (Mad.)] , wherein, while dealing with the decision of the Supreme Court in the case of Mak Data (P) Ltd. v. Commissioner of Income Tax [(2013) 38 taxmann.com 448 (SC)] , which was relied upon by the learned counsel for the Revenue also, it was held that the question would be whether the assessee had offered an explanation for conce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urnishing of the inaccurate particulars attracting the penalty. 15. Referring to paragraph 8 of the decision in Mak Data P. Ltd , the learned counsel urged that where the assessee in that case had surrendered the additional sum as undisclosed income with a view to avoid litigation and buy peace, the Supreme Court had upheld the penalty under Section 271(1)(c) of the Act. 16. Similarly, relying upon the decision of the Delhi High Court in Zoom Communication Pvt. Ltd. supra, she urged that the Explanation to Sub-section (1) of Section 271 of the Act would be attracted where the assessee fails to offer an explanation or offers an explanation which is found to be false or offers an explanation which he is not able to substantiate and thus, in the instant case, the provisions of Section 271(1)(c) clearly stood attracted. 17. Having given our thoughtful consideration to the rival submissions made at the Bar, facts on record and the case laws produced, we are of the considered opinion that the present appeal of the assessee deserves to be allowed and the substantial question of law deserves to be answered in favour of the assessee and against the Revenue. The reasons are a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ' as well. A partial user is also sufficient to apply Section 32 of the Act. For the reasons best known to the assessee, may be to buy peace and to avoid litigation or under pressure not knowing the correct legal position, he gave up the said claim of depreciation under Section 32 of the Act, but, that does not mean that the assessee admitted the guilt of giving a wrong explanation or a false explanation or having concealed his income or filing inaccurate particulars. There was a total absence of mens rea or guilty animus on the part of assessee in present case. Giving up of the claim of depreciation could not automatically entail the penalty under Section 271(1)(c) of the Act. The imposition of penalty is neither automatic nor is expected to be imposed even if the bona fide explanation of the assessee is not finally accepted by the statutory authorities of the Act. The burden of proving the guilty animus on the part of the assessee is on the Revenue, like on Prosecution in criminal cases and no such negative burden could be cast upon by the assessee himself. 21. We do not find any such material on record brought by the Assessing Authority which would indicate, much less, pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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