2004 (1) TMI 342 - AT - Income Tax

Tribunal upholds cancellation of penalty for mistaken depreciation claim

The Tribunal upheld the Commissioner of Income Tax (Appeals) decision to cancel the penalty imposed under section 271(1)(c) of the Act. It was determined ... - Issues:Department's grievance against penalty cancellation under section 271(1)(c) of the Act.Analysis:The Department appealed against the cancellation of a penalty of Rs. 47,100 under section 271(1)(c) of the Act. The dispute arose from the assessee claiming depreciation on a truck purchased in 1981, which the Assessing Officer (AO) disallowed, leading to penalty proceedings. The assessee argued that the depreciation issue was a matter of opinion, as evidenced by allowance in the subsequent year. The Commissioner of Income Tax (Appeals) [CIT(A)] found a dispute regarding the truck's use, concluding no fraud or concealment by the assessee, thus canceling the penalty.The Departmental Representative supported the AO's decision, citing the revised return's claim for depreciation as a false claim. The assessee maintained that there was no concealment or false declaration, relying on various legal precedents. The Tribunal noted that denial of depreciation does not equate to income concealment, citing the Harshvardhan Chemicals case where debatable deductions did not constitute concealment. The Orissa High Court also supported depreciation claims even without active use during the accounting year.The Tribunal emphasized that a bona fide mistake in depreciation claims does not warrant penalty under section 271(1)(c). It clarified that assessment and penalty proceedings are distinct, requiring actual concealment or inaccurate particulars for penalty imposition. In this case, the assessee acted in good faith in claiming depreciation, not denied by the AO. Consequently, the Tribunal upheld the CIT(A)'s decision to delete the penalty.The cross-objection by the assessee, supporting the CIT(A)'s order, was deemed infructuous following the Tribunal's confirmation of the decision. Ultimately, the Department's appeal was dismissed, and the assessee's cross-objection was dismissed as infructuous.