Penalty upheld under Section 271(1)(c) for false income details on inflated and bogus asset depreciation claims

The ITAT Ahmedabad upheld the penalty under section 271(1)(c) for concealing or furnishing inaccurate particulars of income related to depreciation claims. The penalty was confirmed on depreciation disallowed due to inflated asset costs and bogus asset purchases. The assessee's reliance on a favorable ITAT decision in a separate case was rejected, as facts differed and the bogus nature of asset purchases was established through departmental findings and admissions. The assessee failed to contest the factual findings or demonstrate identity with the other case. Consequently, the tribunal found no merit in the assessee's arguments and upheld the CIT(A)'s order confirming the penalty on disallowed depreciation for both inflated and bogus assets.

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ISSUES:

Whether penalty under Section 271(1)(c) of the Income Tax Act, 1961 can be imposed for concealment or furnishing inaccurate particulars of income relating to depreciation claimed on capital assets'Whether disallowance of depreciation on the basis of statements recorded under Section 132(4) from an unrelated third party during search proceedings is sustainable'Whether depreciation claimed on assets purchased at inflated cost or on bogus/non-genuine assets can attract penalty under Section 271(1)(c)?Whether the assessee's request for physical verification of assets affects the validity of disallowance and penalty'Whether reliance solely on assessment order without independent finding of default in penalty proceedings is sufficient for penalty under Section 271(1)(c)?Whether disallowance of depreciation by the Assessing Officer in assessment proceedings necessarily constitutes furnishing inaccurate particulars of income attracting penalty under Section 271(1)(c)?Whether precedent decisions allowing depreciation claims on similar facts are applicable to the present case for negating penalty liability?

RULINGS / HOLDINGS:

Penalty under Section 271(1)(c) was rightly imposed for concealment/furnishing inaccurate particulars of income relating to depreciation claimed on inflated cost and bogus assets, as the assessee failed to provide reasonable explanation or evidence to the contrary.Disallowance based on statement recorded under Section 132(4) of an unrelated third party was upheld, given the corroborative evidences including seized documents and admissions by related parties, thereby sustaining the penalty.Depreciation claimed on assets purchased at inflated cost (Rs. 55,32,934/-) and on bogus assets (Rs. 7,86,414/-) was disallowed, and penalty confirmed, as these transactions were found to be non-genuine and the parties involved were non-traceable or debarred by VAT authorities.The assessee's request for physical verification of assets was not granted by the Assessing Officer; however, the penalty was sustained since the assessee accepted the disallowance of depreciation on bogus assets and failed to controvert the findings of non-genuineness.Reliance solely on the assessment order without independent finding of default in penalty proceedings was not explicitly discussed as a ground for interference; penalty confirmation indicates acceptance of factual findings by the Tribunal.The Supreme Court precedent that disallowance in assessment does not ipso facto amount to furnishing inaccurate particulars was distinguished on facts, as here the disallowance related to inflated and bogus assets, evidencing concealment.The ITAT decision in a similar case allowing depreciation on non-bogus assets where physical verification was denied was held distinguishable, as the present case involved both inflated and bogus assets, and the assessee had accepted disallowance on bogus assets.

RATIONALE:

The penalty provisions under Section 271(1)(c) require concealment or furnishing of inaccurate particulars of income; disallowance of depreciation on inflated or bogus assets satisfies this criterion.Search and seizure proceedings under Section 132 and statements recorded under Section 132(4) provide admissible evidence to support findings of non-genuine transactions, especially when corroborated by seized documents and admissions by related entities.Physical verification of assets is a relevant factor but not determinative; acceptance of disallowance by the assessee and factual findings of non-traceability and VAT debarment of suppliers support the conclusion of bogus purchases.The Tribunal applied a fact-specific approach distinguishing precedents based on the nature of assets (bogus vs. inflated) and the assessee's conduct, emphasizing that penalty is justified where concealment or inaccurate particulars are established.The ruling aligns with the principle that mere disallowance does not automatically attract penalty unless there is evidence of concealment or misreporting, which was found on the facts here.

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