TaxTMI 
TaxTMI 
2017 (11) TMI 448
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.... circumstances of the case and in law, the Ld. CIT(A) has erred in delet ing penal ty for furnishing of inaccurate par t iculars of overlooking the crucial fact that the assessee had made on improper claim of higher of depreciation on the co- generation plant. 3. On facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting penalty which was correctly levied by the A.O, as the assessee had knowingly claimed higher deduction relating to 100% depreciation when the assessee had services of trained accountants and legal professional and cannot ignoring of law as a defense. 4. For these and other grounds that may be urged at the time of hearing, the decision of the CIT(A) may be set aside and that of the A.O restored." 2. Briefly stated, the facts of the case are that the assessee company which is engaged in the business of manufacturing of sugar and organic chemicals since last several years and also into cogeneration and distribution of power had filed its return of income on 01.11.2004, declaring total loss of Rs. 50,25,88,693/-, and the book profit u/s 115JB at Rs. Nil. The case of the assessee was taken up for scrutiny assessmen....
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.... at the rate of 100%, as against the allowable rate of 80%. The A.O issued a show cause notice u/s 274 r.w.s. 271(1)(c) to the assessee on 18.12.2006, calling upon it to explain as to why penalty u/s 271(1)(c) may not be imposed upon it for excess claim of depreciation. The assessee in the course of the penalty proceedings tried to impress upon the A.O that the raising of depreciation at the rate of 100%, i.e. as per the preamended rates which were applicable till AY: 2002-03 as against the allowable rate of 80% for the year under consideration was on account of an inadvertent bonafide mistake. However, the A.O not being persuaded to accept the aforesaid contention of the assessee and being of the view that it was beyond comprehension that though the change of the depreciation rate was effective from A.Y: 2003-04, the assessee had remained unaware of the amended rate of depreciation for the year under consideration, therefore, rejected the explanation of the assessee. The A.O in order to fortify his aforesaid conviction, further observed, that the assessee despite being aware of the said wrong claim of depreciation so raised by him, had however neither filed a revised return of inc....
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...., but revised after initiation of scrutiny proceedings and, therefore, assessee concealed income by furnishing inaccurate particulars. Hence, the penalty is levied. But what are the particulars furnished by the assessee, which can be said to be wrong particulars. The detail of assets and their written down value have been correctly furnished. It is merely the claim which has been wrongly calculated at 100% instead of 80% and, therefore, it is only a wrong claim made and not that the wrong or inaccurate particulars are furnished. Therefore, there is no case of furnishing of wrong particulars. Even A.O. has not pointed out as to what is the particular which has been furnished wrong or inaccurate. Making a higher claim or wrong claim by applying higher rate of depreciation does not amount to furnishing of wrong particulars, but it amounts to making a wrong claim only. A.O. is duty bound to allow depreciation as per law, even in those cases where no depreciation has been claimed and, therefore, it is the duty of the A.O. to allow correct depreciation even when higher depreciation has been claimed-and, therefore, claiming higher or lower depreciation does not amount furnishing of inaccu....
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....consideration, viz. AY: 2004-05, which was filed on 01.11.2004, had however neither filed a revised return of income, nor revised its claim of depreciation for the year under consideration, viz. assessment year 200-05. It was thus averred by the ld D.R. that the CIT(A) failing to appreciate the facts of the case in the right perspective had thus erred in setting aside the penalty which was imposed on the assessee under Sec. 271(1)(c). The ld. D.R. submitted that the assessee had intentionally raised a 'False claim' in respect of depreciation on the cogeneration plant. It was submitted by the ld. D.R that the contention of the assessee that excessive rate of depreciation was claimed on account of a bonafide mistake could not be accepted primarily for two reasons, viz. (i) the assessee being a public limited company was supported by a battery of lawyers, pursuant whereto it could not be accepted that it was unaware of its entitlement towards the claim of depreciation on the aforesaid asset; and (ii) that few months back the assessee in the course of the assessment proceedings for the immediately preceding year, viz. AY: 2003-04, had acknowledged its mistake of claiming depreciation o....
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..... A.R that as the 'default' for which the impugned penalty proceedings had been initiated were not borne from the show cause notice, therefore, the A.O had wrongly assumed jurisdiction and imposed penalty in the hands of the assessee. It was further submitted by the ld. A.R that though the A.O had initiated the penalty proceeding by referring to 'Explanation 1' of Section 271(1)(c), however, as the same was not applicable in respect of the second limb of the default contemplated in section 271(1)(c), viz. for furnishing of inaccurate particulars of income, therefore, on the said count also the penalty imposed by the A.O u/s. 271(1)(c) could not be sustained. The ld. D.R strongly objected to the raising of the preliminary objection by the assessee in respect of the validity of the penalty proceedings, for the reason that the default for which the penalty proceedings had been initiated in the case of the assessee were not borne from the show cause notice issued to the assessee under Sec. 274 r.w.s. 271(1)(c). It was submitted by the ld. D.R that as the aforesaid issue was neither raised before the lower authorities, nor the assessee had filed a cross objection before the Tribunal, th....
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....perusal of the letter dated 25.11.2010 (available on record) which was filed by the assessee with the A.O in the course of the penalty proceedings for the preceding year, viz. AY: 2003-04. 8. We have given a thoughtful consideration to the issue before us, and are of the considered view that it remains as a matter of fact that for the very same default on the part of the assessee, viz. claim of depreciation @100%, as against the allowable rate of 80% on cogeneration plant, the A.O in all his wisdom while framing the assessment in the case of the assessee for the immediate preceding year, viz. AY: 2003-04, being of the view that the same was not in the nature of a default which would call for levy of penalty u/s 271(1)(c) in the hands of the assessee, had thus on the basis of his said conviction not even initiated penalty proceedings under Sec. 271(1)(c) on the said issue in the hands of the assessee. We find that the assessee alike the preceding year, viz. A.Y 2003-04, had during the year under consideration also wrongly claimed depreciation in respect of cogeneration plant at the rate of 100%, as against its statutory entitlement of 80%. We though are not oblivious of the fact ....
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.... therefore, for the said stand alone reason the assessee would be liable to levy of penalty u/s 271(1)(c). We though find ourselves to be in agreement with the A.O that the claim of the assessee in respect of its entitlement towards depreciation was undoubtedly a wrong claim, but in the backdrop of the fact and circumstances attending thereto, the said claim cannot be summarily characterized as a 'False claim'. We have deliberated on the facts of the case and are of the considered view that now when the complete details of the asset in respect of which the assessee had claimed depreciation at the rate of 100% were furnished along with the return of income, therefore, merely because the said rate of depreciation was not found to be correct, would though justify disallowance of the excess 'depreciation' while framing of the assessment in the hands of the assessee, but the same merely on the said count cannot justify imposition of penalty on the assessee u/s 271(1)(c). We find that our aforesaid view stands fortified by the judgment of the Hon'ble Supreme Court in the case of CIT Vs. Reliance Petro product (P) Ltd. (2010) 322 ITR 158 (SC), wherein the Hon'ble Apex Court had observed a....