- (1.) The appeal filed by the department and the cross-objection filed by the assessee are directed against the order passed by the Commissioner (Appeals), dated 12-9- 1995, for the assessment year 1981-82.
(2.) In the appeal, the only grievance of the department relates to the cancellation of penalty of Rs. 47,100 under section 271(1)(c) of the Act. The facts related to this case in brief, are that the assessee purchased a truck on 10-3-1981 and claimed depreciation thereon in the revised return. The assessing officer, however, held that the truck was not used for the business of the assessee during the period and, therefore, he did not allow the claim of the assessee for depreciation. However, in the subsequent year, the claim for depreciation was allowed by the assessing officer. In the meanwhile, the assessing officer initiated penalty proceedings under section 271(1)(c) of the Act as, according to him, the assessee had made false claim of depreciation on truck which was not used during the accounting period. The penalty was levied after considering the objections of the assessee with the prior approval of the Deputy Commissioner. 2.1 The assessee carried the matter in appeal before the Commissioner (Appeals) and submitted before him that the matter of depreciation was only a matter of opinion since the assessing officer had allowed depreciation in the subsequent year. It was submitted that the disallowance of depreciation will not establish concealment or fraud on the part of the assessee because it was only a matter of opinion and not anything else. It was also submitted that mere disallowance of depreciation will not prove that the assessee had made false claim. It was, therefore, urged before the Commissioner (Appeals) that the penalty levied by the assessing officer should be cancelled. 2.2 The Commissioner (Appeals) after considering the submissions of the assessee, opined that there was some dispute regarding the use of the truck purchased by the assessee. He found that the assessing officer did not allow the claim of the depreciation in the year under consideration but allowed the same in the subsequent year which shows that the assessee had not made any false claim and there was no fraud involved. The Commissioner (Appeals) observed that it was a matter of dispute regarding the period of use of the truck and the date from which it was put to use by the assessee which proves that the assessee had not committed any fraud or withheld any information from the department. He, therefore, cancelled the penalty imposed by the assessing officer. Now, the department is in appeal. 2.3 Learned Departmental Representative strongly supported the order of the assessing officer and stated that the depreciation was not claimed by the assessee in the original return of income. However, it was claimed in the revised return and so, there was a false claim and the assessing officer was fully justified in levying the penalty under section 271(1)(c) of the Act. 2.4 In his rival submissions, learned counsel for the assessee reiterated the submissions which he made before the Commissioner (Appeals) and submitted that the assessee did not hide anything from the department and there was no case of the department that the assessee concealed any particulars of income or declared wrong income. The only dispute was relating to the allowability of depreciation which had been denied by the assessing officer. Therefore, there was no concealment of income by the assessee and even the assessee had not concealed any particulars of income from the department. As such, the Commissioner (Appeals) rightly deleted the penalty. Reliance was placed on the following cases: (i) Decision of Hon'ble Gujarat High Court in the case of CIT v. Manu Engineering Works . (ii) Decision of Tribunal, Ahmedabad Bench, in the case of J & S v. Income Tax Officer 7 Tax Report 42 (iii) Decision of the Tribunal Jaipur Bench, in the case of Income Tax Officer v. Dr. Tejgopal Bhatnagar, 20 Tax World 368. (iv) Decision of Hon'ble Rajasthan High Court in the case of CIT v. Harshvardhan Chemicals & Minerals Ltd. . (v) Decision of Hon'ble High Court of Orissa in the case of CIT v. Indian Metals & Ferro Alloys Ltd. (1994) 117 CTR (On) 378. (vi) Decision of Tribunal Delhi "C" Bench in the case of Goyal Gases (P) Ltd. v. Dy. CIT . (vii) Decision of Tribunal, Jodhpur Bench, in the case of Income Tax Officer, v. President, Transport of India ITA No. 1290(Jp)/1995; assessment year 1991-92. (viii) Decision of Tribunal Madras Bench "D" in the case of Ramalakshmni Spiners (P) Ltd. v. Income Tax Officer, 98 Taxation 77(4). 2.5 We have heard both the parties at length and also gone through the material available on record along with various citations quoted by the learned counsel for the assessee. In the instant case, it is true that the claim for depreciation was not allowed by the assessing officer on the basis that the assessee had not used the truck during the year under consideration. It is also true that the depreciation is allowable even if the assets are ready to be used for the business purposes and mere denying the claim of depreciation, cannot be considered as concealment of income by the assessee. 2.6 Hon'ble Rajasthan High Court in the case of CIT v. Harshvardhan Chemicals & Minerals Ltd. (supra), held that : "No penalty was leviable in view of the finding of the Tribunal that when the assessee had claimed deduction of an amount that was debatable it could not be said that the assessee had concealed any income or furnished inaccurate particulars for evasion of tax". In the instant case also, the issue as to whether depreciation should be allowed in the year under consideration or in the subsequent year, was a debatable issue. Therefore, it cannot be said that the assessee had concealed any income or furnished inaccurate particulars of income. Therefore, the assessing officer was not justified in levying the penalty and the Commissioner (Appeals) had rightly deleted the same. 2.7 On a similar issue, the Hon'ble High Court of Orissa in the case of CIT v. Indian Metals & Ferro Alloys Ltd. (supra) observed as under : "Coming to the claim made by the assessee it is to be noted that the claim for depreciation and development rebate was made relying on sections 32 and 33 of the Act. Depreciation is allowable on machinery even if it is used at any time, however, short, during the accounting year. The word 'used' embraces passive as well as active user. Depreciation can also be allowed in certain cases, even if the machineries have not been actually worked during accounting year." From the above observations of the Hon'ble High Court of Orissa, it can safely be held that the depreciation can be allowed in certain, cases even if the machinery had not been actually used during the accounting year. From the above, it would be clear that allowability of the claim for depreciation was a debatable issue and as such it cannot be said that the assessee had concealed any income or furnished any wrong particulars of income by claiming depreciation on the purchase of the truck made by it during the period relevant to the assessment year under consideration. 2.8 Similarly, Tribunal, Delhi "C" Bench in the case of Goyal Gases (P) Ltd. v. Dy. CIT (supra) held that : "Since the incorrect claim of depreciation was on account of a bona fide mistake while working out depreciation, penalty under section 271(1)(c) is not leviable. " 2.9 It is true that the assessment proceedings and penalty proceedings are two separate and distinct proceedings and if some addition/disallowance had been made in the assessment proceedings, that itself will not prove that the assessee concealed particulars of income or furnished inaccurate particulars of income for which he will be liable to be penalised under section 271(1)(c). For imposing penalty under section 271(1)(c), two things are required : (i) concealment of income and (ii) furnishing of inaccurate particulars of such income. 2.10 In the instant case, neither the assessee furnished inaccurate particulars of income nor concealed any particulars of such income and under the bona fide belief claimed depreciation on the truck which was purchased during the year under consideration. This fact has not been denied by the assessing officer. 2.11 We, therefore, after considering the totality of the facts as narrated hereinabove in this order, are of the confirmed view that the Commissioner (Appeals) has rightly deleted the penalty imposed by the assessing officer under section 271(1)(c) of the Act which was not leviable to the facts of the present case.
(3.) In the cross-objection, the assessee merely supported the order passed by the Commissioner (Appeals). Since we have already confirmed the order passed by the Commissioner (Appeals), the cross-objection filed by the assessee has become infructuous. Accordingly, we dismiss the same as having become infructuous.;