ITAT Hyderabad Cancels Penalty under Section 271(1)(c): Genuine Explanation Upheld

The Appellate Tribunal ITAT Hyderabad ruled in favor of the assessee, canceling the penalty imposed under section 271(1)(c) of the I.T. Act, 1961. The Tribunal held that the withdrawal of the depreciation claim during survey proceedings did not warrant a penalty, citing legal precedents and the specific tax computation under section 115JB. The decision was based on the genuine explanation provided by the assessee and the absence of tax evasion, ultimately allowing the appeal and setting aside the penalty on 13.08.2014.

---

---

Issues:
Penalty under section 271(1)(c) of the I.T. Act, 1961 for false claim of depreciation.

Detailed Analysis:

Issue 1: Claim of Depreciation and Penalty Imposition
The assessee, engaged in drug manufacturing, claimed depreciation on units not put to use, leading to penalty proceedings under section 271(1)(c). The Assessing Officer (A.O.) initiated penalty proceedings due to the withdrawal of the depreciation claim after a survey operation. The Ld. CIT(A) confirmed the penalty, rejecting the assessee's contention of bonafide claim and absence of tax evasion. The assessee argued that the claim was genuine, as units were ready for use, and the withdrawal did not warrant a penalty. The Ld. Counsel reiterated the bonafide nature of the claim, emphasizing that withdrawal during survey proceedings does not imply income concealment.

Issue 2: Judicial Precedents and Legal Interpretation
The Learned D.R. argued that the withdrawal of the depreciation claim rendered it bogus, citing legal precedents like Dayabhai Girdharbhai vs. CIT and Ravi & Co. vs. ACIT. However, the Tribunal analyzed the facts and legal provisions, emphasizing that the withdrawal of the claim did not impact the tax computation under section 115JB. Referring to the decision in CIT vs. M/s. Nalwa Sons Investment Ltd., the Tribunal highlighted that concealment without affecting tax evasion does not warrant penalty under section 271(1)(c). The Tribunal also cited cases like DCIT vs. Bhanwar Lal Mahendra Kumar Soni and Godavari Townships P. Ltd. vs. DCIT, indicating that a genuine explanation and tax computation under section 115JB negate the need for penalty.

Conclusion:
The Tribunal, after detailed analysis, concluded that the withdrawal of the depreciation claim during survey proceedings did not merit a penalty under section 271(1)(c). Citing legal precedents and the specific tax computation under section 115JB, the Tribunal ruled in favor of the assessee, allowing the appeal and canceling the penalty. The decision was pronounced on 13.08.2014 by the Appellate Tribunal ITAT Hyderabad, setting aside the penalty imposed under section 271(1)(c) of the I.T. Act, 1961.

---