2013 (3) TMI 555 - AT - Income Tax

Assessee's appeal allowed, penalties deleted for no concealment. Tribunal rules in favor based on legitimate interpretations.

The appeal by the assessee was allowed on all grounds. Penalties were deleted as there was no concealment found in the disallowances made by the AO. The ... Penalty U/s 271(1)(c) on the disallowance of depreciation on plant and machinery - sustenance of penalty on the addition of lease equalization amount - Held that:- Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under section 271(1)(c) The assessee has claimed the amount of lease equalization charges on the basis of guidance note issued by ICAI and has disclosed all material facts in its Profit and Loss Account and balance sheet filed along with the return of income. We further find that on the similar issue Hon’ble Apex Court in CIT V/s Reliance Petroproducts Pvt. Ltd.(2010 (3) TMI 80 - SUPREME COURT)d eleted the similar penalty - Decided in favor of assessee. Issues:1. Barred by limitation2. Sustenance of penalty on disallowance of depreciation on plant and machinery3. Sustenance of penalty on addition of lease equalization amountIssue 1: Barred by limitationThe appeal was filed against the order dated 8.7.2010 passed by the ld. CIT(A) for the Assessment Year 2002-03. The assessment was completed after making various disallowances, leading to an increased income for the assessee. The AO initiated penalty proceedings under section 271(1)(c) of the Income Tax Act, 1961, based on the upheld disallowances. The assessee contended that the order passed by the AO was barred by limitation. However, during the hearing, the assessee's counsel decided not to press this ground. As there was no supporting material presented, the ground was rejected.Issue 2: Sustenance of penalty on disallowance of depreciation on plant and machineryThe AO disallowed a portion of the depreciation claimed by the assessee on plant and machinery, specifically on items like routers, switches, and ancillary equipment, reducing the depreciation rate to 25%. The ld. CIT(A) initially upheld the assessee's claim for 60% depreciation. However, the Special Bench of the Tribunal ruled that these items should be included in the block of 'Computer' eligible for 60% depreciation. As the claim was ultimately allowed as per the Tribunal's decision, it was concluded that there was no concealment by the assessee, and the penalty imposed was deleted.Issue 3: Sustenance of penalty on addition of lease equalization amountThe AO disallowed the lease equalization amount claimed by the assessee, adding it back to the total income. The ld. CIT(A) and the Tribunal upheld this disallowance. The assessee argued that the claim was based on the guidance note issued by ICAI and had disclosed all relevant details in the Profit and Loss Account. Citing precedents and consistent Tribunal decisions, it was contended that there was no concealment on the part of the assessee. Following the Tribunal's consistent view and the decision of the Hon'ble Apex Court, the penalty was deleted, as there was no concealment found. The grounds taken by the assessee were allowed, and the penalty levied by the AO and upheld by the ld. CIT(A) was deleted.In conclusion, the appeal by the assessee was allowed on all grounds, with penalties being deleted in both instances where disallowances were initially made. The Tribunal found that there was no concealment on the part of the assessee, as the claims were based on legitimate interpretations and guidance, ultimately accepted by the Tribunal.