2012 (5) TMI 116 - AT - Income Tax

Tribunal cancels penalties under Section 271(1)(c) for genuine claims

M/s LALA HARBHAGWAN DASS MEMORIAL & DR PREM HOSPITAL (P) LTD Versus INCOME TAX OFFICER

M/s LALA HARBHAGWAN DASS MEMORIAL & DR PREM HOSPITAL (P) LTD Versus INCOME TAX OFFICER - TMI Issues Involved:1. Imposition of penalty under Section 271(1)(c) for claiming excessive depreciation on CT scan machine.2. Imposition of penalty under Section 271(1)(c) for claiming interest on a building loan for a building not used for business purposes during the year.Detailed Analysis:1. Penalty for Excessive Depreciation on CT Scan Machine:Facts:- The assessee claimed depreciation at 40% on a CT scan machine, considering it as life-saving equipment.- The Assessing Officer (AO) noted that CT scan machines are not listed under life-saving medical equipment eligible for 40% depreciation and allowed only 25%.- The AO initiated penalty proceedings under Section 271(1)(c) for concealment of income and furnishing inaccurate particulars.Assessee's Argument:- The claim was made under a bona fide belief that CT scan machines are similar to MRI machines, which are eligible for 40% depreciation.- The claim was not made with any malafide intention, and all relevant particulars were disclosed.AO's Decision:- The AO rejected the assessee's explanation, stating that the claim of 40% depreciation was not bona fide and imposed a penalty for furnishing inaccurate particulars.CIT(A) Decision:- The CIT(A) confirmed the AO's decision, stating that the assessee furnished inaccurate particulars by claiming higher depreciation.Tribunal's Analysis:- The Tribunal observed that the assessee's claim was based on a bona fide belief and all relevant facts were disclosed.- It referred to the Supreme Court's decision in Reliance Petroproducts Pvt. Ltd., which held that a mere making of a claim, which is not sustainable in law, does not amount to furnishing inaccurate particulars.- The Tribunal concluded that the claim for higher depreciation was made in a bona fide manner and did not attract penalty under Section 271(1)(c).Conclusion:- The Tribunal directed the deletion of the penalty imposed for claiming excessive depreciation on the CT scan machine.2. Penalty for Claiming Interest on Building Loan:Facts:- The assessee claimed interest on a building loan for constructing a building, which was not used for business purposes during the year.- The AO disallowed the interest claim and initiated penalty proceedings under Section 271(1)(c).Assessee's Argument:- The building was constructed by a contractor, and advances were shown as 'advances to contractor' in the balance sheet.- The building was put to use during the year, and the claim was made under a bona fide belief.AO's Decision:- The AO rejected the assessee's explanation, stating that there was no evidence of the building being used for business purposes and imposed a penalty for furnishing inaccurate particulars.CIT(A) Decision:- The CIT(A) confirmed the AO's decision, stating that the assessee furnished inaccurate particulars by claiming interest on the building loan.Tribunal's Analysis:- The Tribunal noted that the assessee provided all relevant material during the quantum and penalty proceedings.- It observed that the claim for interest was made under a bona fide belief and all relevant facts were disclosed.- The Tribunal referred to various judicial precedents, including the Supreme Court's decision in Reliance Petroproducts Pvt. Ltd., which held that a mere disallowance of a claim does not amount to furnishing inaccurate particulars.Conclusion:- The Tribunal directed the deletion of the penalty imposed for claiming interest on the building loan.Final Judgment:The appeal of the assessee was accepted, and the penalties imposed under Section 271(1)(c) for both issues were deleted. The Tribunal held that the claims were made in a bona fide manner and did not amount to furnishing inaccurate particulars or concealment of income.