TMI Blog2017 (1) TMI 390X X X X Extracts X X X X X X X X Extracts X X X X ..... y income or furnishing inaccurate particulars of income. We are, therefore, of the view that assessee should not be visited with penalty u/s 271(1)(c) - Decided in favour of assessee - ITA No. 59/Ahd/2014 - - - Dated:- 4-1-2017 - Shri S. S. Godara, JM and Shri Manish Borad, AM. For The Appellant : Smt. Urvashi Sodhan, AR For The Respondent : Shri James Kurien, Sr. DR ORDER PER Manish Borad, Accountant Member . This appeal of assessee for Asst. Year 2007-08 is directed against the order of ld. CIT(A)-III, Ahmedabad, dated 27/11/2013 in appeal No.CIT(A)-III/ACIT(OSD)/R.1/13-14, assigned by CIT(A)-IV, vide CCIT(CCA), Ahmedabad s order No.CCIT/Abd/HQ/Tech/Jurisd-Iction (Appeals)/2013-14 dated 21/08/2013. This order arises out of the order u/s 271(1)(c) of the I.T. Act, 1961 (in short the Act) framed on 30.03.2012 by ACIT (OSD), Range-1, Ahmedabad. 2. Assessee has raised various grounds which are not in consonance with Rule-8 of ITAT Rules, 1963. However, sole grievance of the assessee is confined to a single issue against the order of ld. CIT(A) confirming penalty u/s 271(1)(c) of the Act on disallowance of depreciation of ₹ 7,80,826/-. 3. Briefly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this date and therefore the claim of depreciation by appellant during the year was wrong. This cannot be considered a bonafide omission or mistake on the part of appellant. In such a situation, case of appellant clearly falls in the category (b) of Para 12 as mentioned above. I therefore hold that levy of penalty u/s. 271(l)(c) is fully justified in this case in view of decision of Hon'ble Supreme Court in the case of Dharmendra Textile. It would be a travesty of truth and justice to express a view to the contrary. Now a days only a microscopic minority of returns are selected for detailed scrutiny. The taxpayers are aware of this and many of them try to take undue advantage of this by filing incorrect income. This tendency needs to be strongly discouraged. It is therefore necessary that concealment of income is penalized suitably so that it acts as effective deterrence for other taxpayers. Keeping in view all these facts, I hold that levy of penalty u/s. 271(l)(c) is justified in this case. However, AO is directed to restrict levy of penalty in respect of amount of ₹ 7,80,826/- only on account of wrong claim of depreciation as mentioned above. No penalty is leviable in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m building at Mumbai purchased by assessee on 5.3.2007 at ₹ 1,51,18,160/-. Assessee started construction for making a Bath Studio in the show room building which was completed on 31.5.2007. Claim of assessee of depreciation of ₹ 7,80,826/- on the show room has been denied by the Assessing Officer as in his view the show room building was put to use only after the completion of construction of Bath Studio and the date of completion of construction is 31.5.2007 and therefore, no depreciation was allowable for F.Y.2006-07 on the cost of show room building. We further observe that when the quantum issue came up before the Tribunal in ITA No.744/Ahd/2011 disallowance of depreciation was confirmed by the Co-ordinate Bench by observing as follows :- 4. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The undisputed facts are that the assessee had purchased the premises on 05/03/2007 and for the purpose of Bath Studio the furnishing and other work were carried out from March-07 to 31st May-2007. The contention of the assessee is that the premises were put to use for business purpose as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in respect of a building constructed in the course of the erection of a new plant. Can depreciation allowance be claimed for the building for a period: (1) before the completion of the installation of machinery in the said building; (2) before it starts functioning effectively; (3) before the production (even trial run) is commenced and the business of the company of manufacturing an article with the aid of the said machinery has commenced? Can depreciation be allowed in these facts and circumstances when it is allowable upon the property being used for or in the bus/ness of the said unit of the company? In other words, the question is whether it can be said that the building has been used in the business even before the articles, for production of which the plant is set up, have not been produced and the machinery itself has become functional later on. 4.2. The Hon'ble Gujarat High Court in the case of Suhrid Geigy Ltd.(supra) held as under:- 3. The view taken by the Tribunal is that the date on which the machinery installed in the building became functional is irrelevant. What is relevant is the date on which the machinery was installed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the machines had already been installed? In order to succeed, the assessee must establish- (1) that the building in question was used for the purpose of his business, and (2) that it was used for the purposes of his business during the relevant period. Now, attention must be focussed on the expression have been used by the assessee in his business or profession during the previous year . The emphasis is on user of the building in the business of the assessee . Mere preparation for the user cannot amount to user. There must be actual, effective and real user in the commercial sense. And the user must be so linked with the business that it can be said that there is an immediate nexus between the user and the business, i.e., the real business of the assessee. The business of the assessee was to produce the dyestuffs etc. The building was used for the purpose of business of production of dyestuffs only after the machines became operative w.e.f. 7th March, 1965. Counsel for the assessee has argued that the machines had first to be installed before these machines could be operated. The user had, therefore, it is so argued, commenced on the date on which the install ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee with effect form the date on which trail production was commenced. It appears that there was a time lag between the date when the trial production commenced and the date when the actual production commenced. The Court took the view that the date on which the trial production commenced was irrelevant for the purposes of claiming depreciation and that it cannot be said that the company had set up its business at the point of time when the trial production had commenced. In other words, the company had not commenced its business from the standpoint of the right to claim depreciation for the user of a building or machine in the business of the assessee-company. Under the circumstances, the conclusion is inescapable that the Tribunal had committed an error in reversing the view taken by the ITO as confirmed by the AAC and in deciding the question in favour of the assessee. We, therefore, answer the question referred to us, as under: Question : Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the Azo building was used for the purposes of business for more than one month in the relevant accounting year for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Studio on 31.5.2007 and not on the date of purchase of show room building on 5.3.2007. 12. In the backdrop of above discussion crucial question which remains to be answered is whether penalty u/s 271(1)(c) of the Act can be imposed when in the given circumstances there is no case of furnishing inaccurate particulars of income rather there is only a dispute about the claim of assessee which was made with some justification but was not accepted by the Revenue authorities? . We find that answer to the above question can be found in the judgment of Hon. Supreme Court in the case of Price Waterhouse Coopers Pvt. Ltd. vs. CIT in Civil Appeal No.6924 of 2012 wherein the Hon. Court observed as follows:- 17. Having heard learned counsel for the parties, we arc of the view that the facts of the case are rather peculiar and somewhat unique. The assessee is undoubtedly a reputed firm and has great expertise available with it. Notwithstanding this, it is possible that even the assessee could make a silly mistake and indeed this has been acknowledged both by the Tribunal as well as by the High Court. 18. The fact that the Tax Audit Report was filed along with the return and that it u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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