M/S. TOSHA INTERNATIONAL LTD.,NEW DELHI vs. ITO, NEW DELHI

Aggrieved by the orders dated 13/12/2016 and 16/12/2016 passed by the learned Commissioner of Income Tax (Appeals)-33, New Delhi (“Ld. CIT(A)”), in respect of the assessment years 2001-02 and 2003-04 Tosha International Ltd (“the assessee”) preferred these two appeals.

Briefly stated facts are that the assessee is a sick company engaged in the manufacture of black and white picture tube. For AY 2001-02 and 2003-04, while completing the assessment, the Ld.AO disallowed the depreciation claimed by the assessee on Plant & Machinery on the ground that the assessee was not carrying out any business activity in that year.

Ld.AO initiated the penalty u/s 271(1)(c) of the Act and levied penalty of Rs.12, 94, 574 /-and Rs. 4, 22, 384/-respectively for these 2 years which the assessee contested before the Ld.CIT(A) arguing that the claim of depreciation of Plant & Machinery in respect of the years for which no business activity was carried out, was a debatable issue and no penalty could be levied on the disallowances made on the basis of such debatable issues. However, the Ld.CIT(A) held that as per law, the assessee can make claim if the asset was used only during the course of business activity and on that ground, Ld.CIT(A) dismissed the appeals of the assessee.

It is the arguments of the Ld. AR that in view of the decision of the Hon'ble High Court in the case of Yamuna Motors India Pvt.Ltd. and CIT vs Societex, allowability of depreciation on the Plant & Machinery in respect of the years in which the Plant & Machinery was not put to use if once the Plant & Machinery was used for the earlier years, is a debatable issue. He submitted that merely because the AO had taken a view that such a claim is not to be allowed, in the absence of any element of concealment of income or furnishing inaccurate particulars thereof, penalty cannot be imposed. Per contra, Ld. DR vehemently relied upon the orders of the authorities below and submitted that the false claim amounts furnishing of inaccurate particulars thereof.

We have carefully gone through the record. Absolutely there is no dispute as to whether the assessee furnished the particulars of the claim of depreciation truly and fully in the return of income. However, there is a difference of opinion between the assessee and the AO as to whether such depreciation is allowable or not. There is a difference between "false claim" and "wrong claim". Here in this case merely because the AO thought it fit to disallow the claim of depreciation per se, it does not become a false claim or amount to concealment of income or furnishing all inaccurate particulars thereof. So long as the assessee had furnished all the details relating to the claim of depreciation in the return of income, in the absence of any allegation as to the false claim, invoking to the provisions of section 271(1)(c) of the Act is bad under law. If the assessee prefers a claim for depreciation without installing the Plant & Machinery, it becomes false claim. But if the depreciation is not allowed as deduction, it cannot be a false claim and at the best, it could be a wrong claim.

Further, the assessing officer also levied a similar penalty under similar circumstances in respect of the assessment year 2002-03 also on account of disallowance of the depreciation on the Plant and Machinery, which penalty was confirmed by the Ld. CIT(A) in appeal. It is brought to our notice by the Ld. AR that in ITA 5832/del/2015 for assessment year 2002-03, a coordinate Bench of this Tribunal upheld the argument of the assessee and deleted the penalty. A copy of order is produced. We have gone through the same.

It is, therefore, clear that under similar circumstances for the assessment year 2002-03 the coordinate Bench of this Tribunal held that the claim preferred by the assessee was not a false claim and at best it could be a wrong claim which had already been disallowed and therefore while applying the decision of the Hon’ble Apex Court in the case of CIT vs. Reliance Petro Products Private Limited (2010) 322 ITR 158 (SC) held that every disallowance of any claim for deduction will not automatically lead to the levy of penalty. Identical facts and circumstances would lead to the similar conclusions and in the absence of any compelling reasons to differ, we find it difficult to take a different view for these two assessment years.

With this view of the matter, while respectfully following the decision of the Hon'ble Apex Court in the decision of CIT vs Reliance Petroproducts Pvt. Ltd. [2010] 322 ITR 158 [SC], followed by a coordinate Bench of this Tribunal in ITA 5832/del/2015 for assessment year 2002-03, we find it difficult to sustain the levy of penalty in this matter. We, therefore, direct the AO to delete the penalty for the relevant year.