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TMI Blog1989 (5) TMI 87X X X X Extracts X X X X X X X X Extracts X X X X ..... n and 17 factories spread all over the country. (c) The assessee has a clean record inasmuch as all along in the past, there were no serious disputes regarding depreciation claimed/allowed except perhaps, certain minor routine ones. (d) The assessee was all along been furnishing the depreciation chart as a whole and it was for the first time that in the year under consideration the Assessing Officer asked for factory wise depreciation chart. (e) The accounts of the assessee are computarised but on certain urgent occasions adjustment in the accounts are carried out manually, mainly to save time. (f) On 29-6-1984 the assessee had filed its return of income, wherein it had claimed depreciation of Rs. 53.57 crores. However, in the revised return(s) as well as by letters addressed to the Assessing Officer from time to time the depreciation claimed by the assessee stood at Rs. 47.15 crores. (g) The Assessing Officer took up the assessment only in 1987 by issuing a Notice on 21-4-1987. (h) The first questionnaire was issued on 4-5-1987. 5. In order to better appreciate the rival stand of the parties, it would be necessary to mention at the outset, the basic facts regarding d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... untry and in order to work out depreciation one has to consider over 150 items in the depreciation rate schedule. Since the rate of tax applicable to the assessee remained mostly constant and since the assessee was entitled to 100% deduction by way of depreciation over the years, some sort of complacency had crept in on both sides. The degree of complacency was to such an extent that most of the time the assessee had failed to claim full depreciation to which it was entitled. Inviting our attention to pages 25 and 26 of the compilation 1 [being the statement of fact filed before the CIT(A)], he pointed out the following two such instances : " (a) The assessee-company is a very large manufacturing company, in which not only the manufacturing and selling operations are spread out at various locations (thirty-three) but also the accounting systems are decentralized. Hence, the job involved in preparing the Return of Income is quite voluminous where certain errors could creep in, which in any case, are totally unintentional. (b) As in this year, where due to certain mistakes the assessee-company had preferred higher depreciation claims in the original return of income (which in any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he scrutiny made by the IAC had come as a blessing in disguise to the assessee as it had to reclassify various items of plant/machinery and rework depreciation allowable thereon. In that process, the assessee not only got more depreciation than claimed for in the year under consideration (see para 5 above), but it was able to streamline the whole aspect of maintaining depreciation record which was in "a complete mess" as was rightly observed by the IAC (Assessment) in his order. 8. The learned counsel for the assessee reiterated his submissions made before the income-tax authorities and strongly urged that since there was no mala fide intention in claiming higher depreciation originally, the penalty imposed under section 271(1)(c) of the Act, should be set aside. Inviting our attention to the data (summarised in para 5 above), the learned counsel for the assessee was fair enough to state that it cannot be disputed that originally the assessee had claimed depreciation of Rs. 53.57 crores. However, he hastened to state that this was revised to Rs. 47.15 crores much before the Assessing Officer took up the assessment on 21-4-1987. Further, he highlighted the fact that in the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of the Pollution Control Equipment in the assessment year 1983-84, the same was not claimed due to inadvertence/oversight. The learned Counsel for the assessee, therefore, fervently argued that on due and proper appreciation of the facts and circumstances obtaining in the instant case, we should hold that there was no justification in invoking the provisions of section 271(1)(c) of the Act. He made a reference to the decision in the cases of Narendra Kumar Rajendra Kumar Jain v. CIT [1988] 174 ITR 479 (MP) and Mahadeswara Movies v. CIT [1983] 144 ITR 127 (Kar.). Finally, he also made a reference to the order of the Tribunal in the case of Patel Engg. Co. v. ITO [1988] 39 Taxman (Mag.) 236 (Ahd.), to which one of us was a party. 9. The learned representative for the Revenue also took us through the entire record and highlighted the material aspect to impress upon us that all was not well with the assessee and that but for the thorough scrutiny made by the IAC (Assessment), the assessee would have got away with deduction of more depreciation than what was due to it. Taking us through the relevant portion of the order sheet entries, he pointed out that once the assessee was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see, in his reply, once more invited our attention to the data summarised at para 5 above and pointed out that the assessee was granted more depreciation than it had claimed prior to the notice issued on 21-4-1987. Again, in respect of the 3 disputed items, the assessee gave up the first even though it was entitled to ESA on some of the electrical installation while in respect of the 2 other items the assessee got more depreciation than that claimed in the original return. Therefore, according to the learned counsel for the assessee none of the reported decisions relied on behalf of the revenue would be of any help in deciding the point at issue. Further, according to him, in the instant case, there was no question of invoking the provisions of the Explanation to section 271(1)(c) of the Act. 11. We have carefully considered the rival submissions of the parties and the voluminous material to which our attention was drawn by the parties. In our view, this is not a fit case for imposing penalty under section 271(1)(c) of the Act. In our opinion, on the appreciation of the facts and circumstances obtaining in the instant case in proper perspective the action of the income-tax author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vious year even though it was entitled to depreciation on the Opening Block also. This is yet another instance of inadvertence or mistake which could have been rectified or remedied. The Assessing Officer was fair enough to allow the assessee to revise its claim in this regard. The original claim was of Rs. 2.18 crores and the revised claim was of Rs. 2.60 crores, while the depreciation allowed was Rs. 2.52 crores. This also clearly establishes that no motive whatsoever could be attributed to the assessee so as to bring its case within the purview of section 271(1)(c) of the Act. (d) Dumper At the outset, it would be worthwhile observing that the issue as to whether the dumpers are "earth-moving machinery used in open cast mining" is highly debatable and the only reported High Court decision on this issue, at the relevant time, was in favour of the assessee. In this view of the matter, the assessee was eligible to claim depreciation of Rs. 0.99 crores. However, with a view to avoid time consuming litigation, the assessee revised the claim to Rs. 0.83 crores. Surely for this act of the assessee also there cannot be any question of invoking the provisions of section 271(1)(c) of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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