Block depreciation rules prevent asset reclassification; unsupported higher depreciation claim can attract penalty for inaccurate particulars.

Claiming 100% depreciation by reclassifying furniture and fixtures as temporary wooden structures was held inconsistent with the block-of-assets regime, because assets in an existing block cannot be reopened and re-rated after amalgamation merely to alter the depreciation rate. The Tribunal noted that the claim was contrary to the scheme of section 32(1) and section 43(6), including the written down value rules, and that the explanation offered lacked a bona fide basis. Mere disclosure in the depreciation schedule did not cure an ex facie inadmissible claim, and such unsupported reclassification attracted the deeming consequence under Explanation 1 to section 271(1)(c) for furnishing inaccurate particulars.

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Issues: Whether penalty under section 271(1)(c) was leviable for claiming 100% depreciation on assets shown as furniture and fixtures by reclassifying them as temporary wooden structures, and whether the assessee's explanation and disclosure were bona fide and sufficient to avoid penalty.

Analysis: The assessee had claimed depreciation at 100% on a part of the block of furniture and fixtures after amalgamation, but the earlier treatment of the same block had consistently been at 15%. The Tribunal held that under the scheme of block depreciation, assets could not be reopened and reclassified in the manner adopted by the assessee so as to change the applicable rate of depreciation. It further held that the claim was contrary to the scheme of section 32(1) and section 43(6), including the rule governing written down value on amalgamation, and that the explanation offered was not supported by a bona fide basis. The Tribunal also found that the disclosure in the depreciation schedule did not cure the defect, because a claim that is ex facie inadmissible and not supported by a bona fide explanation attracts the deeming consequence under Explanation 1 to section 271(1)(c).

Conclusion: Penalty under section 271(1)(c) was held to be validly imposed, and the assessee's appeal failed.

Ratio Decidendi: A wrong claim for depreciation, made by reclassifying assets contrary to the block-of-assets regime and without a bona fide, substantiated explanation, amounts to furnishing inaccurate particulars and attracts penalty under section 271(1)(c).

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