2015 (10) TMI 383 - AT - Income Tax

Penalty u/s 271(1)(c) - as per AO assessee had deliberately and wrongly claimed depreciation - Held that - On facts the addition by way of disallowing the depreciation claimed on facts is concerned the same has rightly been made in the quantum proceedings which fact has been accepted by the assessee by filing a revised return and not agitating the issue further. Considering the explanation offered by the assessee in the penalty proceedings it is seen that repeatedly it is claimed that the return was finalized on the basis of figures appearing in the Sale Deed. This fact has not been disputed by the department and is found to be supported from the assessment order itself. In the aforementioned peculiar facts and circumstances considering the fact that even after the said addition the assessee was allowed business loss to be carried forward to the extent of Rs. 2.96 crore odd we have no hesitation in following the judicial precedent relied upon to hold that the explanation offered is bonafide and deserves to be allowed. It is seen that at best the claim of the assessee can be called a wrong claim and by no stretch of imagination on the facts as they stand can it be called a false claim. We have taken into consideration the order of the coordinate bench relied upon in the case of Vasudev Pahwa vs. ACIT (2012 (10) TMI 1009 - ITAT DELHI) and the principle laid down in the case of CIT vs. Reliance Petro Products Limited (2010 (3) TMI 80 - SUPREME COURT) which was subsequently followed in the case of Price Water House Coopers Pvt. Ltd. vs. CIT (2012 (9) TMI 775 - SUPREME COURT ). Thus the penalty order deserves to be quashed - Decided in favour of assessee.

Summary

Issues:
- Imposition of penalty under section 271(1)(c) of the Income Tax Act, 1961.
- Validity of penalty imposed by the Assessing Officer and confirmed by CIT(A).
- Bonafide error in claiming depreciation on windmills.
- Justification for penalty imposition based on false claim.

Analysis:

1. Imposition of Penalty under Section 271(1)(c):
The case involved an appeal against the imposition of a penalty under section 271(1)(c) of the Income Tax Act, 1961. The penalty was imposed by the Assessing Officer and confirmed by the CIT(A) for the assessment year 2007-08. The penalty amount in question was Rs. 284,500.

2. Validity of Penalty Imposed:
The penalty was imposed due to the disallowance of depreciation claimed on windmills by the assessee. The Assessing Officer found that the assessee had claimed depreciation on the land as well, which was not allowable. The explanation provided by the assessee that it was a bonafide error and not a false claim was not accepted by the authorities. The CIT(A) also upheld the penalty, leading to the appeal before the Tribunal.

3. Bonafide Error in Claiming Depreciation:
The assessee contended that the claim of depreciation was based on figures from the sale deeds, which did not provide a separate cost for land and windmills. The assessee argued that since the figures were based on the sale deed, it was not a case of furnishing inaccurate particulars or making a false claim. The Tribunal noted that the assessee had accepted the addition made in the quantum proceedings and had filed a revised return.

4. Justification for Penalty Imposition:
After considering the explanations and precedents cited, the Tribunal held that the claim made by the assessee could be considered a wrong claim but not a false claim. The Tribunal referred to judicial precedents, including the Apex Court's decisions in Reliance Petro Products and PWC cases, to support its decision to quash the penalty order. The Tribunal found that the explanation offered by the assessee was bonafide and deserved to be allowed.

5. Conclusion:
In conclusion, the Tribunal allowed the appeal of the assessee and quashed the penalty order under section 271(1)(c). The Tribunal emphasized that the claim made by the assessee, although incorrect, did not amount to a false claim given the circumstances and the reliance on figures from the sale deed. The decision was based on the bonafide nature of the error and the absence of any intent to deceive or conceal income.

This detailed analysis highlights the key issues, arguments, and the Tribunal's reasoning leading to the decision to quash the penalty order.