9911796707
TMI Blog2012 (5) TMI 116X X X X Extracts X X X X X X X X Extracts X X X X ..... in the appendix of Income Tax Rules 1962, it was noted that in the block of plant and machinery at S.No. 3(xia), among the list of life savings medical equipment eligible for depreciation @ 40%, the name of CT Scan Machine is not mentioned. The AO, therefore, held that CT Scanner machine purchased during the year is not eligible for depreciation @ 40% under the block of life saving medical equipment. The assessee did not offer any explanation in this regard and submitted that depreciation @ 40% was claimed under the bonafide belief that it is covered under 'lifesaving medical equipment' just like Magnetic Resonance Imagine System on which it has been claiming depreciation @ 40% since A.Y. 2003-04. The A.O., however, noted that the assessee reduced the amount of Rs.5 lakh on account of sale of old CT scan machine from the WDV of the block of assets under the head 'plant & machinery' eligible for depreciation @ 4.0% and not from the WDV of block of assets under the head 'life saving medical equipment' eligible for depreciation @ 40%. The A.O. further stated that the assessee could not establish that the CT scan machine purchased was put to use for the purpose of business during the y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... losed by it and referred to some decisions. 5. The submissions of the assessee were considered by the A.O. but was not found tenable for the reasons discussed in para.4 and 4.1of his order, which are reproduced below in which the Assessing Officer held the assessee is liable for penalty u/s 271(1)(c) of the Act for concealment of income and for furnishing inaccurate particulars of its income. " The submissions of the assessee have been duly considered but not found tenable as the assessee has claimed depreciation of New Scan machine@ 4O% on the block of assets of life saving medical equipment' whereas the assessee itself when sold the old CT scan machine. The assessee has reduced this amount from the written down value of the block of assets under the head 'Plant & Machinery' eligible for depreciation @25%. Secondly, the name of CT Scan machine is not mentioned among the list of life saving medical equipment eligible for depreciation @40%. Therefore, it is clear that the assessee has well aware about the claim of depreciation on CT Scan Machine. Thus the contention of the assessee that the wrong & excess charging of depreciation was unintentional was not correct. The facts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as per Income Tax Act. Both MRI and CT Scanner are Diagnostic Tools to Non-Invasively (non-surgically) look inside the body. Both have same functions but are used for and for different purposes. The Depredation Chart as per Income Tax Act and Note on CT Scan & MRI functions at Pg.49-56.Being purely Medico-technical terms and considering the same functions, assessee treated the CT Scanner as Life Savings Medical, Equipment like MRI and charged depreciation rate @ 40% whereas 14. AO has gone by exact phraseology in Depreciation Chart. b) As regard charging of Depreciation @ 25% on old CT Scan Machine, the assessee was under the impression that they were charging less depreciation earlier, actually the depreciation @ 40% has to be charged. Due to said reason, Assessee has changed the depreciation rate from 25% to 40% on the basis as mentioned in para (a). c) The Depreciation on CT Scanner @ 40% was charged on bonafide belief - that CT Scanner and MRI are of same category. Assessee has provided all the Material Particulars before the AO. There will not be any revenue loss to the Department as total depreciation amount cannot be exceed by the cost of machinery over a period of time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irector is at Pg. 58. The user of the building is evident by this fact that the earlier building being used for classes was on rent for Rs. 6,500/- per month till Sept. 2004 which was discontinued when own building was ready for use. The said fact confirms that old building was no longer in use and new building was used for business purposes. Even the bus was purchased for the purpose of transporting and ferrying the students to the new building, copy of receipt for purchase of Bus is at Pg. 57. The user of the said building is further established by the copy of the ledger account of the electricity to show that classes started from Nov. 2004 and the electricity charges jumped substantially since then, copy of ledger A/c of Electricity is at Pg. 59; However the Ld. AO and Ld. CIT(A) did not accept the contention of the assessee during quantum proceedings and disallowed Interest: paid during the year' on. loan taken for construction of building; copy of order is at Pg. 29-37 relevant Page 34-36 Para.3 and CIT(A)order is at Pg. 38-45 relevant page 44-45. Whereas assessee has provided all relevant material during Quantum Proceedings before AO and CIT(A) as welt as in Penalty Proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs Equipment' and so far as interest on capital investment in incomplete building which has been used as class rooms. So, claim of the assessee with respect to both the items is bona fide one, hence, penalty is not attracted. Reliance was heavily placed on decision of Gujarat High Court in the case of National Textiles vs. CIT, 249 I.T.R. 125, the Hon'ble Supreme Court judgement in the case of CIT vs. Reliance Petroproducts Pvt. Ltd., 322 I.T.R. 158 and Hon'ble Punjab & Haryana High Court in the case of CIT vs. Siddhartha Enterprises, 322 I.T.R. 80 and Bombay High Court decision in the case of CIT vs. Upender dated 5.8.2009. 9. Ld.Counsel for the assessee also placed reliance on various documents furnished in the paper book and particular reference has been made to page 14, 28-30, 31, 34, 54 and 55-70 to lay stress on the plea that all relevant facts were already there with the Assessing Officer. In this case, Assessing Officer has not established that assessee has furnished only inaccurate particulars of income and, moreover, neither any concealment has been detected nor any new fact was found and in view of authoritative pronouncements as relied upon, penalty in this is not exig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve heard both the sides and gone through the facts of the case, relevant material and the decisions relied upon on behalf of the assessee as well as by the department, as regards penalty levied in respect of amount of excess depreciation and interest on amount borrowed for building which was incomplete and find that not even a whisper has been made in the penalty order as to which specific particulars were furnished inaccurate or were concealed. The expression 'has concealed the particulars of income' and 'has furnished inaccurate particulars of income' have not been defined either in section 271 or elsewhere in the Act. However, not withstanding the difference in the two circumstances, it is now well established that they lead to the same effect namely, keeping off a certain portion of the income from the return. According to Law Lexicon, the word "conceal" means: "to hide or keep secret. The word 'conceal' is concelare which implies to hide. It means to hide or withdraw from observation; to cover or keep from sight ; to prevent the discovery of ; to withhold knowledge of. The offence of concealment is, thus, a direct at tempt to hide an item of income or a portion thereof from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me have been disclosed by him, then the amount added or disallowed in computing the total income of such person as a result thereof shall for the purpose of clause (c) of section 271(1), be deemed to represent the income in respect of which particulars have been concealed. In other words, the necessary ingredients for attracting Explanation 1 to section 271(1) (c) are that (i) the person fails to offer the explanation, or (ii) he offers the explanation which is found by the AO or the CIT (Appeals) or the Commissioner to be false, or (iii) the person offers explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same have been disclosed by him. 14. If the case of any assessee falls in any of these three categories, then the deeming provision provided in Explanation 1 to section 271(1) (c) come into play, and the amount added or disallowed in computing the total income shall be considered as the income in respect of which particulars have been concealed, for the purposes of clause (c) of section 271(1), and the penalty follows. On the other hand, if the assessee is able to offer an explanation, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer is required to arrive at a finding that the explanation offered by an assessee, in the event he offers one, was false. He must be found to have failed to prove that such explanation is not only not bona fide but all the facts relating to the same and material to the income were not disclosed by him. Thus, apart from his explanation being not bona fide, it should have been found as of fact that he has not disclosed all the facts which was material to the computation of his income." 15. In the light of aforesaid observations of the Hon'ble Apex Court, what is to be seen in the instant case, is whether the claim for deduction of excess depreciation and interest on amount borrowed for building which was incomplete, made by the assessee was bona-fide and whether at all the material facts relevant thereto have been furnished and once it is so established, the assessee cannot be held liable for concealment penalty u/s 271(1)(c) of the Act. The Assessing Officer has not been able to establish that the claim of the assessee for deduction of excess depreciation and interest on amount borrowed for building which was incomplete was not bona fide or that any specific particulars were conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs regarding the income of the assessee. Thus, merely because the assessee had claimed the expenditure in relation to exempt income, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, attract the penalty u/s 271(1)(c) of the Act. In the present case, we are of the opinion that the disallowance of claim for deductions of excess depreciation and interest on amount borrowed for building which was incomplete, cannot be considered as concealment of income or furnishing inaccurate particulars thereof, especially when all the relevant particulars were disclosed before the AO. The following observations made by the Hon'ble Apex Court in the aforesaid case of M/s Reliance Petro Products(supra) are relevant: "10. It was tried to be suggested that Section 14A of the Act specifically excluded the deductions in respect of the expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. It was further pointed out that the dividends from the shares did not form the part of the total income. It was, therefore, reiterated before us that the Assessing officer had correctly reached the conclusion that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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