Penalty under Income Tax Act not justified for inaccurate income particulars claim

The Tribunal held that the penalty under section 271(1)(c) of the Income Tax Act was not justified as the assessee's claim for depreciation on assets acquired with capital subsidy, though unsustainable, did not amount to furnishing inaccurate particulars of income. The Tribunal directed the Assessing Officer to delete the penalty, allowing the appeal of the assessee.

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Issues Involved:
Levy of penalty under section 271(1)(c) of the Income Tax Act on disallowance of depreciation claimed on capital subsidy.

Analysis:
The appeal was filed against the penalty order passed under section 271(1)(c) of the Income Tax Act, 1961. The main issue raised in the appeal was the imposition of a penalty on the disallowance of depreciation claimed on capital subsidy amounting to Rs. 3,30,900. The Assessing Officer had initially levied the penalty on various additions made, but the Commissioner of Income Tax (Appeals) restricted the penalty to only one addition related to the non-reduction of subsidy received for calculating depreciation on assets. The argument put forth by the assessee was that the issue was debatable, and since complete facts were disclosed in the income tax return, there was no merit in the penalty imposed.

The Assessing Officer and the Commissioner of Income Tax (Appeals) contended that the assessee furnished inaccurate particulars of income by claiming depreciation on the full value of assets acquired with the capital subsidy received. However, the Supreme Court clarified that merely making a claim that is not sustainable in law does not amount to furnishing inaccurate particulars regarding income. The Court emphasized that the legislature did not intend to levy a penalty in every case where the claim made by the assessee was not accepted by the assessing authority.

The Court further noted that the assessee had provided complete information regarding the capital subsidy received and the assets purchased, albeit claiming depreciation at a higher value. This bonafide mistake in claiming higher depreciation did not establish that inaccurate particulars were furnished. Therefore, the penalty under section 271(1)(c) was not justified in this case.

In conclusion, the Tribunal found no merit in the Commissioner's decision to levy a penalty for concealment under section 271(1)(c) of the Act. Consequently, the Tribunal directed the Assessing Officer to delete the penalty, and the appeal of the assessee was allowed.

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