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TMI Blog1984 (4) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... sale of the vessel. It is seen that depreciation to the tune of Rs. 21,084 was granted to the assessee on the vessel for and from asst. yr. 1970-71 to asst. yr. 1974-75. The WDV of the vessel as at the time of the alleged sale was Rs. 49,196. The balancing profit under s. 41(2) to the extent of depreciation granted amounted to Rs. 21,084. The assessee was given an opportunity to make his submissions in the matter vide this office letter dt. 27th July, 1977. It was also proposed to deny depreciation on the vessel, as according to the assessee, the vessel has been sold and was no longer in its ownership as on the last day of the accounting year. The assessee vide his representative's letter dt. 30th July, 1977 has stated "under the law, there is no balancing profit in view of the provisions of law". The assessee's explanation is not acceptable. In case of any asset used in the business and on which depreciation has been allowed, and if the sale price in respect of which is in excess of the depreciated value, i.e. WDV, then balancing profit will be chargeable to tax. I, therefore, tax the amount of Rs. 21,084 under s. 41(2). Also depreciation is not admissible on the vessel as discus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of the profit under s. 41(2), the contention of the appellant's representative that there is no written down value in the case of ships is totally incorrect. Sec. 43(6) lays down that written down value in case of an asset acquired before the previous year is the actual cost to the assessee less all depreciation actually allowed to him. That depreciation is allowed to him on the basis of written down value in each year or on the actual cost is immaterial. All that has to be done is to deduct the total depreciation allowed from the actual cost to arrive at the written down value. This written down value may not be relevant for the purpose of depreciation to be allowed in case of a ship. But is has certainly to be taken into account for determining the profit or gain under 41(2). The ITO was, therefore, justified in charging in profit under s. 41(2)." 8. Having not satisfied with the order of the CIT (A), the assessee preferred an appeal before the Tribunal, wherein, inter alia, it once again contested the applicability of the provisions of s. 41(2) of the Act and the inclusion of Rs. 21,084 in its total income. The Tribunal vide its order dt. 1st Feb., 1981 upheld the action of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osing penalty under s. 271(1)(c) of the Act. 11. Being aggrieved by the order of the CIT (A), the assessee has come up in appeal before the Tribunal. The ld. counsel for the assessee strongly argued that on the facts and circumstances obtaining in the instant case, the IT authorities were not justified in imposing penalty under s. 271(1)(c) of the Act. In this connection he highlighted the fact that all the necessary facts and particulars were furnished in the return of income and since the assessee was under an honest belief that the provisions of s. 41(2) of the Act would not be applicable in the case of ship as compared to building, plant and machinery, no profit under that section would arise when its ship was sold for Rs. 70,000. He also highlighted the fact that since the ship in question was purchased for Rs. 70,280, the assessee had itself shown loss of Rs. 280 under the head "capital gains". It is from this information that the ITO worked out balancing charge of Rs. 21,084. In other words, he wanted to impress upon us that all the necessary material was not only disclosed by the assessee but was also available with the ITO. The ld. Counsel for the assessee went on to sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said High Court, the assessee cannot get any help therefrom. He, therefore urged that we should uphold the order of the CIT (A). 13. The ld. counsel for the assessee in his reply submitted that since the ITO himself has not invoked the provisions of the Expln. 1 to s. 271(1)(c) of the Act, the Revenue should not be allowed to support the action of the ITO at this stage on an altogether different ground. In this connection, he submitted that even when the difference between the income returned and that assessed was more than Rs. 21,084, the ITO had imposed penalty in respect of the addition of Rs. 21,084 only. If the provisions of the Explanation were to be applicable, as urged by the ld. Departmental Representative, then the penalty of Rs. 24,590 should have been imposed by the ITO which is not done in the instant case. Thereafter, he invited out attention to the order of the CIT (A) and pointed out that his line of approach was only on the basis that the assessee had concealed the income. 14. We have carefully considered the rival submissions of the parties as well as the material placed before us and we are of the view that this is not a fit case for imposing penalty und ..... X X X X Extracts X X X X X X X X Extracts X X X X
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