2012 (7) TMI 987 - AT - Income Tax

Tribunal Upholds Deletion of Penalty for Incorrect Depreciation Claim

The Tribunal rejected the department's appeal against the deletion of a penalty under section 271(1)(c) of the IT Act for Assessment Year 1996-97. The ... Penalty under section 271(1)(c) - difference of opinion between revenue authorities - claim of 100% depreciation on plant and machinery for research and development - testing equipment as part of normal production facility - no penalty where two reasonable views existPenalty under section 271(1)(c) - difference of opinion between revenue authorities - claim of 100% depreciation on plant and machinery for research and development - Validity of levy of penalty under section 271(1)(c) for claiming 100% depreciation on machinery alleged to be for research and development when departmental authorities have taken differing views. - HELD THAT: - The Assessing Officer disallowed the claim of 100% depreciation treating the machines as part of normal production and levied penalty for concealment. The CIT(A) had accepted the assessee's claim while the Tribunal restored the Assessing Officer's view. The Tribunal held that the dispute over entitlement to 100% depreciation involved a bona fide difference of opinion between authorities on the same facts. Relying on established precedent that mere addition to income or a differing view by authorities does not automatically attract penalty, the Tribunal concluded that no culpable concealment or furnishing of inaccurate particulars was made out. The departmental objections, including the contention that the claim would have passed undetected but for scrutiny, did not alter that the matter was one of divergent, reasonable views on classification of the machinery and rate of depreciation.Penalty deleted as levy under section 271(1)(c) not sustainable where two reasonable opinions exist regarding entitlement to 100% depreciation.Final Conclusion: Departmental appeal dismissed; order deleting the penalty upheld on the ground that the claim of depreciation raised a bona fide difference of opinion and therefore did not attract penalty under section 271(1)(c). Issues Involved: Appeal against deletion of penalty u/s 271(1)(c) of IT Act for Assessment Year 1996-97.Facts and Decision on Depreciation Claim:The assessee claimed 100% depreciation on machinery for research and development purposes, but the Assessing Officer allowed only 25% depreciation, considering it part of normal production facilities. The CIT (A) later directed 100% depreciation. However, the Tribunal reversed this decision, stating the machinery was for testing defects in products, not R&D. Penalty Imposition and Deletion:The Assessing Officer imposed a penalty for inaccurate particulars leading to higher depreciation claim. The CIT (A) deleted the penalty, prompting the department's appeal. The department argued the penalty was justified as the assessee concealed income by claiming higher depreciation. However, the Tribunal noted the difference of opinion among authorities on the depreciation claim, citing precedents where penalty was not warranted in such cases. The department's objections were dismissed, and the appeal was rejected.This judgment highlights the dispute over the depreciation claim for machinery used by the assessee, leading to a penalty imposition and subsequent deletion. The Tribunal's decision emphasizes the lack of consensus among authorities on the depreciation issue, ultimately resulting in the dismissal of the department's appeal against the deletion of the penalty.