2024 (7) TMI 139 - AT - Income Tax

Section 271(1)(c) penalty cannot be imposed for claiming higher depreciation on biometric devices treated as computers

Mahaonline Ltd. Versus Commissioner of Income Tax (Appeal), National Faceless Appeal Centre, Delhi

The ITAT Mumbai held that penalty under section 271(1)(c) cannot be imposed merely for claiming higher depreciation rate on biometric devices by treating ... Penalty u/s 271(1)(c) - addition made on account of difference in depreciation on biometric device by treating it as part of ‘Plant and Machinery’ block instead of part of ‘Computer’ block - HELD THAT:- It is not a case where the claim is held to be false or bogus or sham. There is no dispute about the asset in question, and the higher rate of depreciation is only a question of interpretation of definition of the computer. It is a case where he had claimed depreciation at certain percentage by treating, the equipment under the block of computers eligible for higher rate of depreciation which has not been found acceptable by the AO who has altered its treatment and subjected it to a lower rate of depreciation. Such a non-acceptance of claim of the assessee by the Assessing Officer per se does not lead to imposition of penalty. In the present case, when the assessee has disclosed and explained all the relevant facts and details pertaining to the claim of higher depreciation on biometric devices, then we do not find that merely claiming a higher depreciation, which is otherwise supported by various judicial presidents would lead to a conclusion that assessee has furnished inaccurate particulars of income. Thus considering case of Reliance Petro Products Pvt. Ltd [2010 (3) TMI 80 - SUPREME COURT] we hold that no penalty is impossible on the disallowance made by the Assessing Officer towards the claim of depreciation made by the assessee. We therefore, delete the penalty so imposed - Appeal of the assessee is allowed. Issues:Penalty under section 271(1)(c) for difference in depreciation rate on biometric device.Analysis:The appeal was against the penalty imposed under section 271(1)(c) of the Income-tax Act, 1961, on the addition made due to a variance in the depreciation rate applied to a biometric device. The assessee claimed depreciation at 60% by considering the device part of the computer block, while the Assessing Officer treated it as part of the plant and machinery block, allowing depreciation at 15%. The disallowance led to a penalty of Rs. 53,000, which was contested before the Tribunal. The key contention was whether the penalty was justified for furnishing inaccurate particulars of income by claiming a higher depreciation rate.The assessee argued that the biometric devices were rightfully considered part of the computer block for depreciation calculation purposes, following the prescribed rules. The Assessing Officer, however, considered them part of the plant and machinery block, leading to the disallowance and subsequent penalty. The assessee relied on the decision of the Hon’ble Supreme Court in the case of CIT vs. Reliance Petro Products Pvt. Ltd., emphasizing that a mere disallowance of a claim does not automatically warrant a penalty under section 271(1)(c).The Revenue contended that the assessee furnished inaccurate particulars by knowingly claiming a higher depreciation rate, despite the devices being categorized under plant and machinery. The Revenue argued that the penalty was rightly imposed as the assessee intentionally claimed a rate not permissible under the law. The authorities below upheld this view, asserting that the penalty was justified for providing inaccurate particulars of income.After hearing both sides, the Tribunal noted that the dispute centered on the interpretation of the asset classification for depreciation purposes and not on the legitimacy of the claim itself. The Tribunal emphasized that the assessee had disclosed all relevant facts and details regarding the higher depreciation claim, supported by legal precedents. Relying on the decision in Reliance Petro Products Pvt. Ltd., the Tribunal concluded that the penalty could not be imposed solely based on the disallowance of the depreciation claim. Consequently, the penalty was deleted, and the appeal of the assessee was allowed.In conclusion, the Tribunal ruled in favor of the assessee, emphasizing that the penalty for the difference in depreciation rate on the biometric device was unwarranted based on the facts presented and legal precedents cited. The decision highlighted the importance of disclosing all relevant information and clarified that a mere disagreement on the depreciation rate does not constitute furnishing inaccurate particulars of income, leading to the deletion of the penalty imposed.