TaxTMI 
TaxTMI 
2017 (8) TMI 330
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....se nor unsubstantiated. The explanation is supported by facts and details as well as legal provisions for claim of depreciation in the case of amalgamation. Therefore, the allegation of the CIT(A) as well as AO that the assessee has furnished inaccurate particulars of income is wrong and bad in law and on facts. There is no case for levy of any penalty u/s 271 (1)(c). 3. The CIT(A) has failed to appreciate that the erstwhile Global Trust Bank was amalgamated into OBC on 14.8.2004 by the Govt. of India u/s 45(7) of the Banking Regulation Act to safeguard the interest of the deposit holders. Therefore, the entire assets Block, stock and barrel at WDV became the actual cost to OBC Pursuant to such amalgamation read with sec. 43(6) clause (c) Explanation 2(b). The assessee has applied the depreciation rates on such assets as applicable to such assets i.e. 100% on purely temporary erections such as wooden structures as prescribed in Income tax Rules, 1962. Therefore, there is no furnishing of inaccurate particulars of income. The penalty should be deleted. 4. The appellant contends that in the above scheme of amalgamation approved by the GOI and RBI, the assessee was m....
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.... amalgamated on 14.08.2004. Therefore, the AO disallowed proportionate sum of Rs. 7,13,13,797/- as excess depreciation claimed by the assessee and added the same to the total income of the assessee. This addition made by the AO stood confirmed by the ld. CIT(A) and Tribunal. 3. Thereafter, penalty proceedings u/s. 271(1)(c) of the Act were initiated and show cause notice was issued to the assessee on 13.01.2012. In response, it was explained that complete disclosure was made in the returns along with the enclosures filed by the assessee and therefore, there is no case for penalty u/s. 271(1)(c) of the Act. It was explained that it was the depreciation chart filed by the assessee that the AO noticed that assessee has claimed 100% depreciation in respect of one of the items under 'furniture & fixtures'. It was also stated that claim of 100% was available to the assessee because of the fact that these items are temporary wooden structures in the bank premises. The contention of the assessee was also that though the items were mentioned under the head 'furniture & fixture' but in brackets it was also mentioned as "interiors". It was explained that mere classification under furniture....
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..... All the grounds of appeal are directed against penalty of Rs. 2,60,95,501/- imposed upon the appellant by the AO u/s 271(l)(c) of the IT Act. The background of the case is that appellant company Erstwhile Global Trust Bank (EGTB) has been amalgamated with OBC by the Government of India vide notification dated 13.08.2004. Consequently the GTB ceased to exist and all its branches etc. became a part of OBC w.e.f. 13/08/2004. For the period up to ) 3.08.2004 the return of income Jar. the Asst. Year 2005-06 was fiied on 29.10.2005 declaring a loss of Rs. 111,45,95,0507-. The said return was pertaining to the transactions of Erstwhile Global Trust Bank from 01.04.2004 to 13.08.2004. In the AY 2005-06 as per the depreciation chart, the assessee has claimed depreciation on the block of "Furniture & Fixture" @ 100% by treating them temporary wooden structure. However, in the earlier years up to the AY 2004-05 the assessee has been consistently claiming depreciation @ 15% on these assets under the block "Furniture & Fixture". In view of the above, the depreciation claimed @ 100% on "Furniture & Fixture" is disallowed and the same is allowed @ 15% being part of the block "Furniture & Fixtur....
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....le GTB under which depreciation was claimed @ 15%. Looking to these facts, we tend to agree with the Id. CIT(A) that the block of assets could not have reopened now with the change of management. Thus, it is held that the assets continued to remain a part of block of furniture and fixtures, entitled to depreciation @15% of the w.d.v." - ----- --.._._-_... In the light of the above as the assessee has furnished inaccurate particulars of income to the extent of Rs. 7,13,13,797^, therefore, the penalty of Rs. 2,60,95,501/- u/s 271(l)(c) oi the Act @ 100% of the tax sought to be evaded was imposed by the AO. The present appeal is filed against the above penalty imposed by the AO. In the appellate proceedings the A/R of the appellant explained that since the ^ as over by OBC, the exercise was undertaken J:o_j_dei)tify_ the as_sets.a_nd as :.a_cgnsequence.pf the examination it was subject to the scrutiny of the auditors and was considered appropriate to reclassify the assets under furniture & fixtures ^mteriors) like glow signs, temporary wooden partitions etc. which could have been written off as revenue __e_xp.enditure and/or claimed as 100% depreciable. All the above....
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....o the transactions of Erstwhile Global Trust Bank from 01.04.2004 to 13.08.2004. In the depreciation schedule in the return filed for AY 2004-05 depreciation on *'Furniture & Fixture" was claimed @ 15% and W.D.V. was shown at Rs. 25,02,51,2941- as on 31/03/2004. The auditors of Erstwhile Global Trust Bank have classified the assets as \ "Furniture & Fixture" on which the Erstwhile Global Trust Bank has been consistently claiming depreciation @15% in all the earlier years. However, while filing the return for AY 2005-06, pertaining to transaction from 01/04/2004 to 13/08/2004 above asset of "Furniture & Fixture" were reclassified in to "Furniture & Fixture" with W.D.V. of Rs. 2,51,98,8507- as on 31/03/04 to claim depreciation @ 15% and W.D.V. of Rs. 22,50,52,444/- as on 31/03/04 to claim depreciation @ 100%. Sub-clause (ii) sec 32(1) clearly provides that depreciation shall be allowed in the case of block of assets as per the prescribed percentage on written down v?l-s ^ec 43(6) clearly provides ihst W.D.V. in the case of cny block of assets means W.D.V. of that block of assets in the immediately preceding previous year as reduced by the depreciation actually allowed in respect ....
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....he actual t-~-- - ^ costji/s 43(6) read with explanation 2. Jfoerefore, at the time of amalgamation, the written down valise of U*e assets of erstwhile GTP u/:ve become the actua! cost of assets of OBC and thereafter OBC has claimed depreciation by putting it in the block of the assets which it is regularly considering as entitled for 100% depreciation. In other words, the assets which have been amalgamated are considered as that year's addition so far as OBC is concerned and the corresponding categorization is done by OBC according to the classification followed by OBC in respect of those assets. 4.6 Therefore, in order to examine whether the abov^ explanation is able to substantiate the claim and whether the explanation of the appellant is bonafide, it is necessary to look into the provisions of explanation 2 to sec 43(6) which is as under: 43(6) "written down value" means- (c) in the case of any block of assets,- = (i) in respect of any previous year relevant to the assessment year commencing on the 1st day of April, 1988, the aggregate of the written down values of all the assets falling within that block of assets at the beginning of the previous....
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....any for the immediately preceding previous year as reduced by the amount of depreciation actually allowed in relation to the said preceding previous year. Therefore, the Y-----~-~- benefits of treatment ofWDV of furniture and fixtures as on 31/03/2004 to be considered as actual cost u/s 43(6) read with explanation (2)_Js^ available after the amalgamation on 13/08/2004only to the amalgamated company which is OBC in the instant case. Theappellant, Erstwhile GTB in the return filed' for AY 2005-06 pertaining to transaction before the amalgamation cannot claim the benefit of W.D.V. to be considered as cost of asset. The benefit is not available to the amalgamating ^e^-iny but onl) to the amalgamated company after the amalgamation. Therefore, claim of depreciation by the appellant on the basis of explanation^^ to sec 43(6) is clearly contrary to the provisions of the Act and as such the explanation^of tht appellant is neither bonafide nor able to substantiate the claim. i 4.7 Further sec 32(1) and 5th proviso below section 32(l)(ii) says: 32.(t) In respect of depreciation of - (0 buildings, machinery, plant or furniture, being ta....
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....pany, in the ratio of the number of days for which the assets were used by them. From the above also, it is clear that while allowing deduction of depreciation to the amalgamating company and the amalgamated company, the deduction shall not exceed the deduction calculated at the prescribed rates as if the amalgamation had not taken place. In view of the above clear provisions, the depreciation on the furniture and fixtures is allowable @15% on which appellant was consistently claiming the \depreciation @ 15% before amalgation. In view of the above, it is clear that the explanation provided by the appellant is not able to substantiate the claim and fails to prove that it is bonafide. 4.8 Further, the claim of the appellant that it made complete disclosure in the depreciation schedule which was duly verified by auditors in the Tax Audit Report, is also of no merit. A bare reading of sec 32(1) and sec 43(6) would reveal even to a layman that there was no scope for getting the benefit of those provision in respect of depreciation as claimed by the appellant. It could not be understood as to how the auditors who are supposed to be experts in lax laws, could give such an opinion....
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....on of assessee's industrial undertakings or in connection with his setting up of a new industrial undertaking or infc-j . J :mit whereas the assessee k> a finance company. We are in agreement with the aforesaid submission of learned counsel for the revenue. That apart, when we find that it is not a case where two opinions about the applicability of section 35D were possible. Therefore, it cannot be a case of a bona fide error on the part of the assessee. The relief available under section 35D of the Act to a finance company is ex facie inadmissible. In such a case it is difficult to accept the plea that error was bona fide. 4,11 Uon'ble IT AT Delhi in Chadha Sugars (P.) Ltd. v. ACIT [2012] 18 taxmann.com 244 (Delhi) upheld the penalty levied u/s 27 U.l)(c) where patently disallowable claim was made on the basis of opinion of auditor. In that decision it was held that: It is the admitted position of law that the expenditure in question is not revenue in nature and, therefore, it is not deductible in computing the total income. It is also the admitted fact that two decisions of the Supreme Court, adverse to the assessee, held filed when the return w....
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....nclusion that penalty was liable to be imposed in a case where the assessee could offer no acceptable explanation for the income not disclosed or the inaccurate particulars he had furnished in his return. 4.13 Hon'ble Apex Court in Union of India vs. Dharmendra Textile processors (SC) 306 ITR 277, Guljag Industries Ltd. vs. CTO (SC) 293 ITC 584 and CIT vs. Atul Mohan Bindai (SC) 317 ITR 1 have held that 'mens rea' not essential lor civil liability of penalty - Penalties under fiscal statutes are for breach of civil liabilities - Willful concealment is not an essential ingredient for attracting civil liability as is the case in the matter of prosecution u/s 276C. 4.14 After distinguishing the decision in CIT vs. Reliance Petroproducts Pvt Ltd. (2010) 322 ITR 158 where Hon'ble Apex Court decision was rendered because two views were possible in that case, Hon'ble Delhi High Court in CIT v. Zoom Communication (P.) Ltd [2010] 191 TAXMAN 179 (Delhi), have held: " It is true that mere submitting a claim which is incorrect, in law, would not amount to giving inaccurate particulars of the income of the assessee, but it cannot be disputed that the claim ....
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....o not require culpable ntens tea. Whether or not the assessee had acted malafidely is not the relevant question to be asked and answered. The relevant question to be asked and answered is whether the assessee has discharged the onus and satisfied the conditions mentioned in Explanation 1 to Section 271 (1 )(c) of the Act. Penalty under Section 271(l)(c) of the Act is imposed when an assessee has concealed his income or-.furnished, inaccurate particulars. In terms of the explanation quoted above, we haVe^tp'-exaaVvne whether the case falls within sub-clause,.(AV-cy (B) and the effect thereof. Sub-clause (A) applies when the assessee fails to furnish any explanation or when an explanation is found to be false. In the present case, sub-clause (A) would not be applicable as assessee has furnished an explanation, and the explanation has not been found to be "factually" false. The assessee had made a wrong claim for deduction under Section SOJA and, therefore, had furnished inaccurate particulars as the claim was not admissible. Sub-clause (B) of the explanation is. therefore, applicable and we have to examine the two conditions whether: (1) The assessee has been able to sho....
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....nts become topic of discussion and conversation in the professional circles. To show and establish bonafides, the assessees had to show some more "tangible material" or basis as to why a clear statutory provision which excludes works contracts was ignored. 12. Penalty of concealment cannot be imposed because the assessee has taken a particular stand or had preferred an interpretation which was plausible and reasonable, but has not been accepted, unless the assessee had not displosojfacts before the have to be distinguished from cases where the claim of the or farfetched. Dubious and fanciful claims under the garb of T a mere pretence and not bonafide. :3L ft is MX the case of the respondent assesses that there were conflicting decisions of Cam or there was a recent decision of the Supreme Court which had escaped or was not understood or an appeal or review etc. was pending before the Court. The explanation added was clear and categorical. The Tribunal has not referred to the Explanation tc. Section 80IA as to why and on what basis divergent interpretations were possible. Absurd or illogical interpretations cannot be pleaded and become pretence and excuses to escap....