By Sri K v. Aravind, Advocate

IN THE HIGH COURT OF KARNATAKA AT BANGALORE Dated this the 13[th]day of October, 2014 PRESENT THE HON’BLE MR. JUSTICE N KUMAR ANTI THE HON’BLE MR. JUSTICE B MANOHAR| ITA No.1081 of 2008 BBRITIWE 1.)The Commissioner ot Income TaxC. R. BuildingC. R. Building Queens Road. Bangalore oOThe Asst. Commissioner of Income Jax Circle-11(3) C. R. Building Queens Road.Bangalore.. Appellant (By Sri K. V. Aravind, Advocate) AND: M/s. Indus Fila Ltd.,No.107, Industrial SuburbII Stage, YeshwanthputrBangalore ... Respondent o (By Sri S. Parthasarathi, Advocate) This ITA filed under Section 260-A of I.T. Act, 1961|arising out of order dated 31-07-2008 passed in ITA|No.1194/Bang/2007, for the Assessment year 2003-04,|praying to (i) formulate the substantial question of law stated|therein; (11) allow the appeal and set aside the order passed|by the ITAT Bangalore in ITA No.1194/Bang/2007, dated|31-07-2008confirmthe.ordersotthe|AppellateCommissioner of Income Tax, Circle-11(3), Bangalore. This ITA coming on for hearing this day,N, KUMAR Jdelivered the following: JU DBGMENT This appeal is preferred against the order passed by|the Tribunal dismissing the appeal filed against the order ofthe first appellate authority who has set aside the penaltyimposed by the assessing authority. 2. The assessing authority after framing theassessment order has observed in the said order that penaltyproceedings under Section 271 (1) (c) of the Income Tax Act,1961 be initiated separately on the above issue. There wasno specific direction. However, penalty proceedings wereinitiated and a sum of Rs.11,08,0860/- was imposed for 3 furnishinginaccurateparticulars.In|appeal,|theCommissioner of Income Tax set aside the penalty|proceedings on the ground that it would not be justified to say that the assessee deliberately furnished inaccurateparticulars to claim higher depreciation and thereby reduceits income. I[t is also recorded that there is no mala fideintention on the part of the assessee in making the claim forhigher depreciation when it has in fact purchased plant andmachinery under the TUF Scheme, which is supported bythe letter of the IDBI and consequent sanction of subsidy oninterest. _ 3. Aggrieved by the said order, the revenue preferred|an appeal to the Tribunal. The Tribunal was of the view anerroneous claim which was to become erroneous later cannotbe subjected to penalty and, therefore, it dismissed theappeal. It is against the said order, the present appeal isfiled. v 4. When two tact finding authorities have recorded|that there is no mala fide on the part of the assessee inputting forth claim for depreciation and it would notconstitute furnishing of inaccurate particulars, we do not seeany justification to interfere with the said material finding offact. Moreover as is clear from the assessment order whichis on record, no direction was issued to initiate penaltyproceedings. This Court had an occasion to consider theeffect of such observation without specific direction in thecase oftCOMMISSIONER OF INCOME TAX AND ANOTHERvs MANJUNATHA COTTON AND GINNING FACTORY /|(2013) 359 ITR 565]'where it was held as under: “93. From these discussion, it is clear that thecondition precedent for initiation of penaltyproceedings under section 271(1)(c) ts existence ofcondition referred to in the said section. Theperson initiating penalty proceedings should besatisfiedabouttheexistenceof|the.saidconditions which should be reflected in theassessment orders passed by them. In a givencase, after appreciating the entire records, the 359 ITR 565]'where it was held as under: “93. From these discussion, it is clear that thecondition precedent for initiation of penaltyproceedings under section 271(1)(c) ts existence ofcondition referred to in the said section. Theperson initiating penalty proceedings should besatisfiedabouttheexistenceof|the.saidconditions which should be reflected in theassessment orders passed by them. In a givencase, after appreciating the entire records, the officer passing the order may categorically statethat he is satisfied that the assessee hasconcealed income. Once such a finding isrecorded that is sufficient to initiate penaltyproceedings. Assuming such a categorical findingis not recorded in the order, at least, he has torecord facts as contemplated in Explanation 1. Ifthese facts are discernible from the assessmentorder, the deeming clause in Explanation 1 isattracted and the income is deemed to have beenconcealed. That gives the jurisdiction to the officerpassing the order to initiate the penaltyproceedings. If the officer passing the assessmentorder is the Assessing Officer, in the said order,the aforesaid facts are not discernible, at least hemust direct initiation ofproceedings under Section2/71(1})(c). The Section (1B) is attracted and thesconditionsdeemedto|existwhichconfersjurisdiction on him to initiate penalty proceedings.sub-section (1B) has no application to an orderpassed by the Commissioner of Income-tax(Appeals) or the Commissioner.” | ; o. Therefore, in view of the aforesaid judgment, in theabsence of a specific direction to initiate penalty proceedings,the very initiation of the proceedings is bad. 6. For the aforesaid reasons, we do not see any merit|in this appeal. The substantial question of law is answeredin favour of the assessee and against the revenue.Accordingly, the appeal is dismissed. Sd/-JUDGE ckl/-| Sd/- | JUDGE|