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2008 (3) TMI 671 - HC - Income TaxLevy of penalty under section 271(1)(c) - furnishing inaccurate particulars regarding the actual use of the two machines, for which depreciation was falsely or wrongly claimed in the return - Doctrine of mens rea - HELD THAT:- It is not in dispute that the machinery has been leased to third party, who in fact, puts it to actual use. Insofar as the assessee is concerned, the machinery is put to use in the course of its business and that satisfies the condition for claiming depreciation. Hence, the claim for depreciation was neither illegal nor can it be said that was based on incorrect particulars. The withdrawal of the claim was on a mute acceptance of the impression given by the revenue that the assessee was not entitled to claim depreciation unless the machinery was actually used. Hence, the subsequent withdrawal did not result in any infraction either by way of concealment of income or on account of having furnished false particulars. In this regard, he would point out that several cases cited at the bar would have to be addressed in relation to the facts and circumstances of the given cases and the line of cases dealing with lease of machinery in the course of business, being considered as use of that machinery and which would be applicable to the assessee ought to be taken note of. Looking to the nature of business which the appellant has been carrying on, the actual user of the machines may not be necessary to be considered in this particular case. The actual user of the machines was by the hirers of the assessee who were handed over the respective machines at their work site for and on behalf of the assessee by TELCO directly. Obviously it was for the hirer who have used, the machinery looking to its own requirement and the job of work that it was doing. But that alone would not be sufficient to deprive the assessee from claiming depreciation on the said machines. As per the agreement entered into by the assessee with its hirers on 15-3-1994 and 29-3-1994, the machines were actually handed over to the hirers at their respective sites. Thus the assessee was not responsible or answerable as to from what dates they were put to actual use by them. Thus it will be equally true that non-user of the machines by the hirers of the assessee would not deprive the assessee from claiming depreciation on the said machines as it had fulfilled the two requirements for claiming depreciation, namely it had become the owner of the machines and the same were in turn leased out to different hirers before 31-3-1994. In fact, there was no need on the part of the assessee to have withdrawn its claim for depreciation for that particular assessment year. It appears that due to some ill advice given to the assessee, it proceeded to withdraw the same and claimed it in the next assessment year. However, this only establishes the bona fides of the assessee and the same cannot be doubted by us. In any case, it has not disputed by the revenue that assessee had become entitled to claim depreciation on the said machines in the next assessment year. This would further go to show that assessee had acted bona fide and the same could not have been doubted at all. The reasons assigned by CIT (A) appears to be well-founded and are based on correct legal proposition. The same could not have been reversed or upset by the Tribunal. Even if doctrine of mens rea is to be applied to the facts of this case, then after having gone through the facts of the case, we are of the considered opinion that conduct, behaviour and attitude of the assessee would show that mens rea is altogether missing. Then obviously assessee would not have exposed itself for levy of penalty as contemplated under section 271(1)(c) of the Act. That being the position, we answer in favour of the assessee and against the revenue. Consequently the order of the Tribunal is hereby set aside and quashed and the order of the CIT (A) is restored. Accordingly the appeal would stand disposed of.
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