2005 (11) TMI 185 - AT - Income Tax

Tribunal Upholds Deletion of Penalties Due to Bona Fide Belief and Full Disclosure in Depreciation and Expenses Claims.

Inocme-tax Officer, Ward-1 (1). Versus Budge Budge Company Limited.

Inocme-tax Officer, Ward-1 (1). Versus Budge Budge Company Limited. - ITD 100, 387, TTJ 103, 139, Issues Involved:1. Penalty for claim of depreciation allowance.2. Penalty for claim of revenue expenditure considered capital in nature.3. Penalty for claim of travelling expenses exceeding permissible limits.Issue-Wise Detailed Analysis:1. Penalty for Claim of Depreciation Allowance:The core issue is whether the penalty levied for the claim of depreciation allowance on plant and machinery, despite the mill being under suspension, was justified. The assessee argued that the plant and machinery were kept ready for use, thus constituting passive use, which should qualify for depreciation. The reliance was placed on judicial precedents such as *CIT v. India Tea & Timber Trading Co.* and *Capital Bus Services (P.) Ltd. v. CIT*. However, the Assessing Officer disallowed the depreciation, citing that the assets were not used for business purposes due to the suspension of operations, referencing decisions like *CIT v. Oriental Coal Co. Ltd.*. The CIT(A) deleted the penalty, noting that the claim for depreciation was made under a bona fide belief, supported by relevant judicial precedents, and thus did not constitute furnishing inaccurate particulars of income or concealment. The Tribunal upheld this view, emphasizing the bona fide belief and the disclosure of all relevant facts in the financial statements.2. Penalty for Claim of Revenue Expenditure Considered Capital in Nature:The second issue pertains to the penalty for claiming pond filling and land leveling expenses as revenue expenditure, which the Assessing Officer deemed capital in nature. The assessee cited the *Teksons (P.) Ltd. v. CIT* decision, which allowed similar expenses as revenue expenditure. The CIT(A) and Tribunal found that the claim was made in good faith based on existing judicial decisions and did not amount to inaccurate particulars or concealment of income.3. Penalty for Claim of Travelling Expenses Exceeding Permissible Limits:The third issue involves the penalty for claiming travelling expenses exceeding the limits prescribed under Rule 6D. The assessee argued that the expenses were genuinely incurred and disclosed in the audit report. The CIT(A) accepted this explanation, concluding that the claim was made in good faith and did not constitute concealment or inaccurate particulars. The Tribunal agreed, noting that the bona fide belief and full disclosure negated the grounds for penalty.Conclusion:The Tribunal upheld the CIT(A)'s decision to delete the penalties, emphasizing the bona fide belief under which the claims were made, the full disclosure of all relevant details, and the absence of any material evidence of concealment or inaccurate particulars. The Tribunal also noted that the final assessed income was nil, aligning with the Supreme Court's decision in *Prithipal Singh & Co.*, which supports the non-leviability of penalties in such scenarios. The Tribunal's decision reflects a consistent application of legal principles favoring the assessee in cases of bona fide claims and full disclosure.