Mere wrong claim of depreciation would not invite penalty U/s. 271(1)(c)

By way of this appeal, the appellant has challenged the judgment and order of the Tribunal, whereby the Tribunal has dismissed the appeal filed by the assessee.

2. While admitting the appeal, the court framed the following question of law :–

“(1) Whether in the facts and circumstances of the case the order passed by the learned Tribunal upholding the order of the learned Commissioner (Appeals) and confirming the penalty of Rs. 67,46,313 under section 271(1)(c) on the assumption that learned Tribunal in quantum proceedings has affirmed the disallowance or Rs. 1,73,53,860 is not perverse?”

3. Counsel for the appellant has contended that the Tribunal has seriously committed an error in setting aside the order of the Commissioner (Appeals) which in its order observed as under :–

“The assessing officer will ascertain as to whether any capital asset has been acquired by making expenses as above and in case the assessee has acquired capital asset then to that extent, the expenditure will be treated as capital. Depreciation will be allowable in case such capital assets have been used for the purpose of business. The alternate plea of the assessee is that the expenditure in respect of mining right should be allowed as deduction from sale proceeds of mining rights in the assessment year 2009-10. In case the assessing officer comes to conclusion that in case the capital expenses amounting to Rs. 1,73,53,860 included in the cost of mining rights, i.e., not-tangible assets then such cost may be considered to be deduced against the sale of mining rights in the assessment year 2009-10.”

4. However, the Tribunal observed as under :–

“The ITAT had confirmed the addition in quantum proceedings at Rs. 1,73,53,860 and concluded that these expenses are capital in nature. The expenses claimed by the assessee were not related to its business but were related to new project. The assessee has concealed the particulars of income by claiming the capital expenditure as revenue expenditure. Where the expenditure is prima facie inadmissible in law and claimed by the assessee bona fide believe that it is deductible cannot be accepted without any evidence in support. Since the law it is inadmissible is well established. The penalty under section 271(1)(c) is liable to be imposed as held by the Coordinate Bench of Delhi ITAT in the case of Chadda Sugar (P) Ltd. v. ACIT (2012) 17 ITR (Trib) 316 (Del). Similar view has also held by the Hon’ble Delhi High Court in the case of CIT v. Zoom Communication (P) Ltd. (2010) 327 ITR 510 (Del). The assessee offered the explanation but was not bona fide and found false. We have considered view that the appellant has furnished inaccurate particulars of income and concealed the income. The case law relied by the assessee are on mens rea or intention to conceal the particulars of income is to be proved by the revenue. The Hon’ble Supreme Court has held in the case of Mak Data (P) Ltd. v. CIT (2013) 358 ITR 593 (SC) that explanation 1 to section 271(1)(c) of the Act raises a presumption of concealment when a difference is noticed by the assessing officer between the reported and assessed income. The burden is then on the assessee to show otherwise by cogent and reliable evidence. When the initial onus placed by the explanation has been discharged by him, the onus shifted to the department to show that the amount in question constituted income and not otherwise. In case before us, the assessee has no intention to declare its true income. It is further held that satisfaction of the assessing officer need not to be recorded in a particular manner. Same view also expressed by the Hon’ble Punjab & Haryana High Court in the case of CIT v. Shyamraj Singh (2014) 367 ITR 74 (P&H). The satisfaction for initiation of penalty is coupled with the findings of the assessment order would show that satisfaction existed in the course of assessment itself and deemed to constitute satisfaction. The Hon’ble Supreme Court in the case of Union of India v. Dharmendra Textile Processors (2008) 306 ITR 277 (SC) has held that willful concealment is not an essential ingredient for attracting civil liability. The assessee intentionally claimed the capital expenditure as revenue expenditure on new project (i.e., cement), which was separate activity of the assessee company from the existing business, i.e., production of fertilizers.”

5. In our considered opinion, in view of the decision of the Supreme Court where it has been held that wrong claim of depreciation will not invite penalty.

6. In that view of the matter, the issue is required to be answered in favour of the assessee and against the Department.

The appeal stands allowed.

NF