TMI Blog2013 (7) TMI 379X X X X Extracts X X X X X X X X Extracts X X X X ..... the end of the year. In respect of plant and machinery, the written down value as on 31.03.2002 was Rs.2,76,38,427/-. As on 31.03.2003, the WDV was Rs.1,07,70,855/-. As per clause 32 of Form No.3CD, there has been no production during the year. The stock-in-trade at the end of the year was nil. All these facts clearly establish that stopping of manufacturing activity in the year 2000 was not on account of temporary lull in the business. The facts show that assessee was intended to close the manufacturing activities. These facts make the claim of depreciation on the plant and machinery was a prima facie inadmissible claim made in the return of income. Since the assessee has failed to make a satisfactory explanation for makings such patently false claim in the return of income, the CIT (A) was not at all justified in deleting the penalty. There is nothing on record which could establish that claim was due to varying legal interpretation. Therefore, restore the order of AO for levying the penalty u/s 271(1)(c) - appeal of the revenue allowed. - ITA No.680/Del./2012 - - - Dated:- 3-5-2013 - U B S Bedi and B C Meena, JJ. For the Appellants : Shri Rupesh Jain, Adv. Ms Sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me from trading activity which was in the nature of business income, therefore the business activity was been carried on. The appellant' found adequate support in judicial precedents for making the claim of depreciation in such circumstances (as referred to in para 6.2 supra). The view taken by the AD and as upheld by the appellate authorities is on account of difference of opinion on interpretation of facts and application of law thereon. In the instant case the appellant has offered an explanation (manufacturing activity not carried out during the year but in later years production shifted to animal food products, thus only temporary lull., business only downsized, depreciation claimed only on the retained fixed assets), the explanation given by the appellant has not been found to be malafide, the judicial rulings relied upon by the appellant did give it sufficient reason to believe that its claim for the depreciation was a bonafide one. In the return of income the appellant had disclosed that its long term business strategies were being revived and that it had losses, the sale of part of fixed assets (2/3rd) was also disclosed. 6.7 On almost similar issue of claim of lull i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preciation. 6.9 Furthermore it has been held in CIT vs. Eastern Medikit Ltd. by the Hon'ble Delhi High Court that no penalty is impossible when two views are possible. In the case of CIT vs Bacardi Martin India Ltd. 288 ITR 585 the Delhi High Court held that merely because there was a difference of opinion between the assessee and the AO it cannot be said that the assessee had intention to conceal income. Hon'ble Calcutta High Court in the case of Burmah Shell Oil Storage and Distributing Co. of India Ltd. vs. Income Tax Officer reported in 112 ITR 592 (Cal.) held as under:- "Rejection of any legal contentions raised by any party and refusal to entertain any claim for deduction made on cogent legal grounds can never constitute concealment or furnishing of inaccurate particulars and no Income tax Officer can, therefore, be satisfied that an assessee has concealment his income or has furnished inaccurate particulars, only because the income-tax officer has chosen to reject the calculation on behalf of the assessee in support of the assessee's claim for deduction and has disallowed such claims for deduction put forward on legal grounds. 6.10 Further in the case of CIT V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... culars. The Ld. Counsel argued that "submitting an incorrect claim in law for the expenditure on interest would amount to giving inaccurate particulars of such income". We do not think that such can be the interpretation of the concerned words. The words are plain and simple. In order to expose the assessee to the penalty unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars." 6.12 Recently the Hon'ble Delhi High Court in the case of Devsons Pvt. Ltd. vs. CIT 329 ITR 483 applying the ratio laid down by the Apex Court in the case of Reliance Petroproducts Pvt. Ltd. and Delhi High Court in the case of Bacardi Martin India Ltd. 288 ITR 585, Nath Brothers Exim International Pvt. Ltd. 288 ITR 670 held that penalty was not imposable u/s 271(1)(c) in a case where all particulars were disclosed by the assessee. 6.13 Respectfully following the ratio of the above judgments which have held that penalty is not imposable on debatable issues or claims/deductions disallowed on account of varying legal interpretations and where pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for levy of penalty u/s 271(1)(c). Ld. DR further submitted that the claim of depreciation during the year was not only inadmissible claim of deduction but it was contrary to the plain words of the statue on which no two opinions are possible. On facts, this case is distinguishable from the facts of Reliance Petroproducts Pvt. Ltd. (supra). Therefore, assessee s reliance on the Hon'ble Supreme Court decision in the case of Reliance Petroproducts Pvt. Limited 322 ITR 158 is not of any help. By making false claims in the form of depreciation, an attempt has been made to reduce the taxable income and such action on the part of the assessee amounts to the furnishing inaccurate particulars of income. Therefore, CIT (A) was not justified in deleting the penalty u/s 271(1)(c) of the Income-tax Act, 1961. The audited accounts for the relevant financial period and the balance sheet and Schedule III in the fixed assets show that the leasehold land at the beginning of the year was Rs.1,66,56,000/- and net block at the end of the year on 31.03.2007 was nil. Similarly, the WDV of the building at the end of the year was also nil. The WDV for plant and machinery at the beginning of the year was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elied upon by the CIT (A) while deleting the penalty. The ld. AR relied on the following case laws :- (i) CIT vs. Aretic Investments (P) Ltd. (ii) CIT v. Reliance Petroproducts Pvt. Ltd. 322 ITR 158; (iii) Decision of Hon'ble Delhi High Court in the case of CIT vs. Mahanagar Telephone Nigam Ltd. ITA No.626/2011; (iv) Decision of Hon'ble Delhi High Court in the case of CIT vs. Societex ITA No.1190/2011; (v) CIT vs. Devsons Logistics Pvt. Ltd. 329 ITR 483; (vi) Decision of Hon'ble Delhi High Court in the case of CIT vs. Mahavir Irrigation (P) Ltd. ITA No.1266/2009; (vii) Decision of Hon'ble Delhi High Court in the case of ACIT vs. C C Construction ITA No.1492/2011; (viii) CIT vs. Kriti Resorts (P) Ltd. 243 CTR 341; (ix) CIT vs. HMA Udyog Pvt. Ltd. (x) CIT vs. M/s. Auric Investment Securities Ltd. 301 ITR 121; (xi) CIT vs. IFCI Limited 328 ITR 611; (xii) CIT vs. M.S. Bindra Sons Pvt. Ltd. 336 ITR 125; (xiii) Narang International Hotel (P) Ltd. vs. DCIT 137 ITD 53 (TM) (xiv) CIT vs. Vibros Organics Ltd. 8. We have considered the pleadings of both the sides. We have also perused the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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