2015 (3) TMI 1219 - AT - Income Tax

Concealment penalty revoked in depreciation disallowance case post Supreme Court decision.

L&T Finance Limited Versus The DCIT, Cir. 2 (2), Aaykar Bhavan Mumbai

The concealment penalty related to the disallowance of depreciation on assets given under sale and lease back basis was at issue in this case. The ... Penalty u/s.271(1)(c) - disallowance of depreciation in respect of assets given under ‘sale and lease back basis’ - Held that:- As decided in case of ICDS Ltd [2013 (1) TMI 344 - SUPREME COURT] assessee is entitled to claim depreciation in respect of additions made to the assets which were leased out. Thus as addition itself has been deleted by the Tribunal, we do not find any justification in levy of concealment penalty - Decided in favour of assessee Issues:Appeal against concealment penalty related to disallowance of depreciation on assets given under sale and lease back basis for assessment years 1995-96, 1996-97, 1997-98.Analysis:The appeals were filed by the assessee against orders passed by the CIT(A) regarding the concealment penalty on disallowance of depreciation for assets given under sale and lease back basis. The grounds of appeal in all the appeals were identical, challenging the levy of penalty under section 271(1)(c). The appellant argued that the CIT(A) erred in upholding the penalty and disregarded the submissions of the appellant and the contentious nature of the issue, which was decided by the Special Bench of ITAT. The Tribunal had earlier sustained the disallowance of depreciation on lease assets, but later rectified its order following the decision of the Hon'ble Supreme Court in a relevant case. The Tribunal directed the Assessing Officer to allow the claim for depreciation on assets given under sale and lease back basis and withdraw any corresponding benefit given to the assessee. The Tribunal noted that the previous order was contrary to the Supreme Court's decision and rectified it accordingly.Considering that the disallowance itself had been deleted by the Tribunal in a previous order, the Tribunal found no justification in levying concealment penalty. Therefore, the concealment penalty was deleted, and all the appeals filed by the assessee were allowed. The Tribunal pronounced the order in the open court on a specified date.In conclusion, the Tribunal's decision revolved around the rectification of its previous order regarding the disallowance of depreciation on assets given under sale and lease back basis. The Tribunal acknowledged the applicability of the Supreme Court's decision in allowing the claim for depreciation in such transactions. As the disallowance had been deleted by the Tribunal previously, the concealment penalty was deemed unjustified and subsequently deleted. The appeals filed by the assessee were allowed based on these considerations.