2018 (7) TMI 750

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....A) erred in confirming the action of the Assessing Officer u/s 271(1)(c) of the Income-tax Act, 1961 in holding the assessee guilty of furnishing inaccurate particulars of income with regard to claim for depreciation disallowed in the assessment. The action being arbitrary, erroneous, unjustified, untenable and unlawful must be quashed with directions for appropriate relief. 2. Briefly stated the facts necessary for adjudication of the controversy at hand are:- on the basis of completed assessment u/s 143(3) of the Income Tax Act, 1961 (for short the 'Act) at income of Rs. 62572560/- by making addition of Rs. 494230/- and Rs. 1563142/- on account of disallowance u/s 40A(3) and on account of excess depreciation claim, respectively, penalty....

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....ssessee has concealed particulars of income or has furnished inaccurate particulars of such income during assessment proceedings?". 7. Hon'ble Supreme Court in a case cited as CIT vs. Reliance Petro Products Pvt. Ltd. 322 ITR 158 (S.C.) while interpreting the provisions contained u/s 271(1)(c) of the Act, decided the identical issue in favor of the assessee. Operative part of which is reproduced for ready reference as under:- "A glance at the provisions of section 271(l)(c) of the IT. Act, 1961 suggests that in order to be covered by it, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. The meaning of the word "particulars" used ....

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....assessee in his return of income is found to be incorrect and erroneous or false. In case, the assessee has claimed excess depreciation, it is for the tax authority to examine if the same is allowable or not. 9. Furthermore, perusal of the notice issued by the Assessing Officer to the assessee u/s 274 of the Act, available at page 79 of the Paper Book, goes to prove that even at the time of issuance of the notice as well as at the time of passing the penalty order, AO was not clear, "as to whether the penalty proceedings are being initiated for 'concealment of the particulars of income or furnishing inaccurate particulars of income', rather the assessee has been charged for having 'concealed the particulars of income as well as furnishing ....

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.... Assessing Officer Sd/- (JANARDAN DAS) Deputy Commissioner of Income-tax Circle 15(1), New Delhi (JARANDAN DAS) Dy. Commissioner of Income Tax Circle-15(1), New Delhi. 10. The identical issue has been decided by the Hon'ble High Court of Karnataka in the case of Commissioner of Income-tax, Bangalore vs. SSA'S Emerald Meadows [2016] 73taxmann.com 241(Karnataka) and has deleted the penalty by following the decision rendered by Division Bench of Hon'ble High Court of Karnataka in the case cited as CIT vs. Manjunatha Cotton & Ginning Factory [2013] 359 ITR 565/218 Taxman 423/35 taxman.com 250(karn). 11. Hon'ble Supreme Court of India upheld the decision rendered by Hon'ble High Court of Karnataka in the case of SSA'S Emerald Meadows (....