2012 (5) TMI 116 - AT - Income Tax

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

The Tribunal accepted the assessee's appeal and deleted the penalties imposed under Section 271(1)(c) for both issues. It held that the claims for ... Penalty imposed u/s 271(1)(c) on claim for deduction of excess depreciation and interest on amount borrowed for building which was incomplete – Held that:- Mere erroneous claim in the absence of any concealment or furnishing of inaccurate particulars, is no ground for levying penalty - there is nothing on record to show that the explanation offered by the assessee was not bona fide or any material particulars were concealed or furnished inaccurate - no fault has been found with the particulars submitted by the assessee in its Return – as decided in CIT vs. Reliance Petroproducts Pvt. Ltd.[2010 (3) TMI 80 - SUPREME COURT] – in favour of assessee. 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.