Penalty u/s 271(1)(c) deleted for depreciation claim on assets invoiced in other firm’s name

Penalty u/s 271(1)(c) deleted for claiming depreciation on assets for which invoices were raised by the vendor in the name of the other firm  – ITAT

ABCAUS Case Law Citation:
ABCAUS 2796 (2019) (02) ITAT

The appeal in the instant case was filed by assessee against the appellate order passed by Commissioner of Income Tax (Appeals) confirming the penalty passed by Assessing Officer (AO) u/s 271(1)(c) of the Income-tax Act, 1961 (the Act).

The assessee was partnership firm engaged in the business of Beauty Parlour. The assessee had purchased certain office assets for which invoices were raised by the vendor in the name of the proprietary firm of the partner.

The said fixed assets were transferred to the books of the assessee firm by way of journal entry and the assessee claimed depreciation on the same. The depreciation on the said fixed assets was disallowed by the AO and the matter went up to the tribunal and tribunal was pleased to dismiss the appeal of the assessee against quantum additions and confirmed the additions made by the AO as confirmed by the CIT(A).

Later, the AO invoked penalty provision u/s 271(1)(c) of the Act and penalty was levied by the AO @ 100% of the tax sought to be evaded by the assessee within the meaning of Section 271(1)(c) of the Act passed by the AO u/s 271(1)(c) of the Act.

The matter travelled to CIT(A) who dismiss the appeal of the assessee .

Before the Tribunal, it was claimed that the proprietary concern in whose name the invoice was made by the vendor, was very famous concern in market and people know the concern. The vendors inadvertently made invoices in the name of that concern as it was well known concern in market.

It was submitted that the said concern accounted for these purchases in its books of accounts and those assets were transferred to the books of accounts of the assessee’s firm through journal entries. . It is also averred that no depreciation was claimed by the proprietary concern on these assets.

The Tribunal noted that the claim of the assessee for depreciation on these assets did not found favour by the all the authorities concurrently while adjudicating quantum additions till the stage of tribunal and the appeal of the assessee was dismissed by tribunal on this ground.

However on the issue of leviability of penalty u/s 271(1)(c), the opined that the assessee had indeed brought this asset in its books of accounts by transferring these assets to its books of accounts through journal entries.

The Tribunal observed that as claimed that the asset was used for business purposes and it could not be refuted by the Department that the said assets were not used for business purposes of the assessee.

The Tribunal opined that since the invoices were only drawn by vendor in the name of other concern and the said concern did not avail depreciation on these assets as is claimed by the assessee, no penalty u/s 271(1)(c) was exigible on the assessee.

Accordingly, the Tribunal deleted the penalty as was levied by the AO u/s 271(1)(c) which stood later confirmed by learned CIT(A) on this count.

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