2014 (9) TMI 87

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.... Defence Sector. It imported an item, by name, Balzars Vacuum Coating Bak 600 Machine, from a foreign country, in the year 1987. In the returns filed for the assessment year 1987-1988, the applicant claimed 100% depreciation on the imported equipment. The Assessing Authority disallowed the claim of the applicant, taking the view that the installation itself was at the fag end of March, 1987, and that it cannot be said that the installation was complete, and since there is no proof of use of the machinery, the question of allowing depreciation does not arise. Apart from disallowing the claim of the applicant, the Assessing Authority levied penalty of Rs. 25,88,650/-. The applicant filed two separate appeals before the Commissioner of Inco....

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....to use for the purpose of the business of the assessee on 30.03.1987 and 31.03.1987 within the meaning of Section 32(1) of the Income Tax Act for claiming depreciation? 3) Whether on the facts and in the circumstances of the case, the appellant is entitled to allowance of depreciation of Rs. 49,75,808/- on Balzers Vacuum Coating Bak 600 machine while computing its income for the assessment year 1987-88? Similarly, in I.T.A.No.1016/Hyd/1996, the following questions were framed and referred to this Court and it is taken up as R.C.No.74 of 1997: 1) Whether on the facts and in the circumstances of the case, the Tribunal was justified in refusing to admit as additional evidence the sworn depositions of the Assessing Officer recorded in ....

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....ing used and, in that view of the matter, the depreciation ought to have been allowed. The learned counsel further submits that the investment upon the imported machinery was huge, and with an intention to avail the benefit under the Act, at the earliest, the applicant claimed depreciation in the financial year 1987-88, and if for any reason, the depreciation was impermissible, there was no justification for imposition of the penalty. He submits that when law confers some benefit in the form of depreciation on an assessee, an attempt made to avail it must not lead to penalization. He further submits that there was no intention on the part of the applicant to commit fraud, and the very fact that the machinery was found to have been instal....

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....ected with the matter. An order, running into 31 pages, was passed, discussing various aspects. The deposition of witnesses, together with the questions and answers, was incorporated. Ultimately, he passed an order, dated 29.03.1990, taking the view that the installation of machinery itself was not complete by 31.03.1987, and accordingly, the depreciation was allowed. He has also imposed the penalty of Rs. 25,88,650/-. The Commissioner (Appeals), however, took the view that though the installation part of it may have taken place, it was not effective to the extent of making the machinery capable of being put to use and that, in fact, the machinery was not put to use. Therefore, the Appellate Commissioner confirmed the findings of the Ass....

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....sion or misstatement, on the part of an assessee, which in turn, is noticed by the Income Tax Officer in the course of processing the return on the one hand, and a claim made by the assessee, turning out to be not permissible in law, on the other hand. On the first aspect, penalty can be imposed, as a matter of course. The reason is that the assessee was not truthful in submitting the returns. If any information was suppressed by the assessee and but for the attentiveness of the Income Tax Officer, it would have escaped taxation, the assessee must certainly be dealt with sternly. Where, however, the assessee honestly files returns by presenting the facts known to him and claims some benefit in his understanding of the law, the mere fact ....