TaxTMI 
TaxTMI 
2013 (11) TMI 937
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....avelling & domestic Travelling expenses relating to the purchase of machinery Rs. 1,46,308/- (iv) Disallowance of depreciation on machinery Rs. 50,375/- Penalty proceedings in respect of the above additions made to the total income of the assessee were also initiated by the A.O. and since the explanation offered by the assessee in response to the show cause notices issued during the course of the said proceedings was not found acceptable by the A.O., he imposed a penalty of Rs. 7,26,784/- u/s 271(1)(c) of the Act being 100% of the tax sought to be evaded by the assessee in respect of the additions made to the total income of the assessee. 3. The penalty imposed by the A.O. u/s 271(1)(c) was challenged by the assessee in an appeal filed before the ld. CIT(A) and a detailed submission was made on behalf of the assessee before the ld. CIT(A) in respect of each and every addition in support of its stand that penalty u/s 271(1)(c) of the Act was not attracted in respect of the said addition. The said submissions as reproduced by the ld. CIT(A) on page No. 6 to 9 of his impugned order are extracted below:- "The amount of expenditure on foreign travel of Rs. 1,....
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....ure." Reliance is placed on the Landmark Judgement of the Hon'ble Supreme Court of India, in the case of CIT. Ahemdabad v/s. Reliance Petro Products Pvt. Ltd decided on l7th March, 2010. 2) Disallowance of claim of depreciation Second hand machinery of Rs.4,03,000/- was put to use on 1-10-2004 and the claim of depreciation was made by your appellant for whole of the year. The Assessing Officer disallowed the depreciation for half the year since the machinery was put to use on 1-10-2004 (less than 180 days as admitted by the Assessing Officer in the Assessment Order and the penalty order) and disallowed sum of Rs.50,375/-. The penalty u/s. 271(1)(c) was levied on the alleged premises of furnishing inaccurate particulars of income. Infact the Assessing Officer has grossly erred in calculating number of days for which machinery was put to use as being less than 180 days where as if we calculate the number of days from 1-10-2004 to 31-3-2005 it comes to 182 days as under : October 2004 31 days November 2004 30 days December 2004 31 days January 2005 31 days February 2005 28 days March 2005 31 days Total 182 days &n....
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.... done by the assessee was genuine, bona fide and also relied upon Accountant. The assessee's Income was already In a loss even without claiming Additional depreciation. Therefore such excess claim of depreciation was not at all advantageous to the assessee. Such a additional claim of depreciation has In fact resulted into a further loss In the total income of the assessee and as such there was no evasion of Tax at all in claiming such additional depreciation, it clearly indicates that such excess claim of depreciation was not a device, rather it was an inadvertent error." 4. The submissions made on behalf of the assessee as above did not find favour with the ld. CIT(A) who rejected the same and confirmed the penalty imposed by the A.O. u/s 271(1)(c) of the Act for the following reasons given in para No. 4.1 to 4.4 of his order:- "4.1 I have gone through the penalty order of the AO and also the written submissions made by the appellant. The AO has proceeded to impose the penalty mainly on account of wrong claim of additional depreciation by the appellant for the period under consideration. The contention of the appellant is that the claim of depreciation was based on ....
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....er to claim the benefit of additional depreciation u/s. 32(1)(iia), the first and foremost condition is that the machinery should be a new machinery and the appellant knew right from the beginning that the machinery is not 'new' and despite that the claim of additional depreciation was made by him. Further, the appellant also did not file the requisite certificate in the prescribed form 3AA from a chartered accountant for claiming the additional depreciation. There is a logic in the arguments of the AO that the certificate from the chartered accountant, which is a legal requirement, was not obtained by the appellant knowing fully well that no chartered accountant would agree to certify an old machinery as new and this very conduct of the appellant proves that the appellant did this with malafide intention to claim the deduction for which he was not entitled to. 4.4. The AR of the appellant has further contended that the error done by the assessee was genuine, bona fide and he also relied upon Accountant. The assessee's income was already in a loss even without claiming additional depreciation. Therefore, such excess claim of depreciation was not at all advantageous to....
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....ee in the year under consideration as well as in the immediately succeeding year, the assessee cannot be held guilty of furnishing of inaccurate particulars of its income to avoid or evade any tax. He contended that there was thus a mistake committed by the assessee in claiming the additional depreciation u/s 32(1)(iia) of the Act for which no malafide could be attributed to the assessee in the facts and circumstances of the case. He contended that it was a bonafide mistake committed by the assessee inadvertently for which penalty u/s 271(1)(c) cannot be imposed as held by the Hon'ble Supreme Court in the case of Price Waterhouse Coopers Pvt. Ltd. v. CIT (2012) 348 ITR 306 (SC). He also contended that although the assessee accepted the disallowance of additional depreciation keeping in view that it was bound to get such depreciation finally in one year or the other, there is nothing brought on record by the A.O. to show that the concerned machinery was not new and it was second hand machinery. 6. As regards the penalty imposed by the A.O. and confirmed by the ld. CIT(A) in respect of other small additions by way of disallowance of expenses etc., the ld. Counsel for the assessee re....
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....ssessment order, on the other hand, shows that this amount was allowed as depreciation on the travelling expenses of Rs. 1,46,308/- capitalised by the A.O. and although submission to this effect was made by the assessee before the ld. CIT(A), it appears that no finding whatsoever has been given by the ld. CIT(A) on this aspect. In our opinion, there was thus no justification in imposing the penalty in respect of the amount of Rs. 36,577/- which did not represent any addition made to the total income of the assessee. 8. As regards the disallowance of depreciation on machinery amounting to Rs. 50,375/- made by the A.O. on the ground that the concerned machinery having been installed on 1-10-04 was used by the assessee only for 180 days, it is observed that specific submission was made on behalf of the assessee before the ld. CIT(A) on the basis of working given that the said machinery was actually used for 182 days. Here again no finding whatsoever has been given by the ld. CIT(A) on the submissions specifically made by the assessee inspite of the fact that the working furnished by the assessee was reproduced by him in para No. 7 of his order which clearly shows that the machinery w....
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....ater had no option but to surrender its claim for additional depreciation. Before the authorities below as well as before us, the explanations offered on behalf of the assessee in this regard is that the mistake in claiming additional depreciation was a bonafide mistake committed by the Accountant inadvertently. However, there is nothing brought on record to support and substantiate the said explanation. As already observed, nothing whatsoever was disclosed by the assessee in the return of income even to indicate that the machinery on which additional depreciation was claimed u/s 32(1)(iia) was old machinery already having used by some other person. Keeping in view all these facts borne out from record, we find it difficult to agree with the stand of the assessee that all the material particulars relating to its claim for additional depreciation were accurately and correctly furnished by it. 11. It is also observed that the reliance placed on by the ld. Counsel for the assessee on the decision of Hon'ble Supreme Court in the case of Price Waterhouse Coopers Pvt. Ltd. (supra) in support of the assessee's case is clearly misplaced as the facts involved in that case are found to be d....