2009 (9) TMI 955 - AT - Income Tax

Tribunal upholds deletion of penalty for unintentional error in depreciation claim

The Tribunal dismissed the Revenue's appeal against the deletion of a penalty imposed under section 271(1)(c) of the IT Act, 1961. The penalty was ... Penalty imposed u/s. 271(1)(c) - Claimed Excess depreciation - Assessment completed u/s. 143(3) - Whether the assessee has concealed the income or furnished inaccurate particulars of income in the context of s. 271(1)(c) - AO passed order u/s. 271(1)(c) held that assessee guilty of furnishing inaccurate particulars of income and concealing the income to the extent of the wrong claim of depreciation. Penalty u/s. 271(1)(c) equivalent to 100 per cent of the tax sought to be evaded on such income has been imposed by the AO. CIT (A) deleted penalty - HELD THAT:- The assessee cannot be said to have either disclosed inaccurate particulars or concealed any particulars of income. Firstly, it is to be appreciated that there is no allegation on the assessee of not disclosing the complete particulars. In fact, the return of income of the assessee was accompanied by a schedule of fixed assets which inter alia showed additions made prior to 30th Sept., 2001 and post 30th Sept., 2001. Moreover, the account books of the assessee have been subject to tax audit u/s. 44AB by a firm of chartered accountants, a copy of which has been placed on record. Even in such statement, the depreciation claim has been calculated by applying the normal rate of depreciation on the entire additions. Secondly, having regard to the fact that the respondent assessee is a co-operative sugar mill which is manned by public officers, the bona fides of the same are prima facie not in doubt. Further, the difference in the claim has arisen on account of a mere wrong application of depreciation rate. It is not a case where such mistake has been found after a long drawn investigation or enquiry so as to establish that any concealed income has been unearthed. The mistake was discovered during the assessment proceedings and the assessee filed a corrected claim in the assessment proceedings. We, therefore, are satisfied that it was a mere mistake committed by the assessee while filing return of income and the entire facts had been duly disclosed by the assessee bona fidely. Thus, there cannot be a scope for alleging any concealment or furnishing of inaccurate particulars of income against the assessee within the meaning of s. 271(1)(c). The CIT(A), in our view, was justified in deleting the penalty imposed by the AO. The ratio of the decision in the case of Dharamendra Textile Processors & Ors.[2008 (9) TMI 52 - SUPREME COURT] does not apply to the facts of the present case. The said decision merely explains the qualitative difference between a criminal liability envisaged under s. 276C and a civil liability provided under s. 271(1)(c) for furnishing inaccurate particulars of income or concealment of income. Therefore, the appeal of the Revenue is dismissed. Issues:1. Penalty under section 271(1)(c) of the IT Act, 1961 imposed by the AO.2. Deletion of penalty by the CIT(A).3. Appeal by the Revenue against the deletion of penalty.Analysis:Issue 1: Penalty under section 271(1)(c) imposed by the AOThe case involved a co-operative sugar mill that claimed excess depreciation in its return of income for the assessment year 2002-03. The AO imposed a penalty under section 271(1)(c) of the IT Act, 1961, amounting to Rs. 4,15,946 for furnishing inaccurate particulars of income and concealing income. The AO found the assessee guilty of inaccurately claiming depreciation, resulting in the penalty imposition.Issue 2: Deletion of penalty by the CIT(A)The CIT(A) deleted the penalty after considering the facts and submissions. The CIT(A) noted that the mistake in claiming depreciation was a bona fide error and not intentional. The accounts were audited, and there was no evidence of deliberate intention to evade tax or conceal income. The CIT(A) concluded that no penalty was leviable as the mistake was genuine, and there was no misrepresentation of facts.Issue 3: Appeal by the RevenueThe Revenue appealed against the deletion of the penalty, arguing that the assessee wrongly claimed depreciation, justifying the penalty under section 271(1)(c). The Revenue cited a Supreme Court decision emphasizing the mandatory imposition of penalties, regardless of intent. However, the respondent's counsel defended the CIT(A)'s decision, highlighting the inadvertent nature of the error and the reliance on audited statements.The Tribunal analyzed the case and found that the assessee did not conceal income or furnish inaccurate particulars. It noted that the mistake arose from applying the wrong depreciation rate, which was corrected during assessment proceedings. The Tribunal emphasized the absence of deliberate concealment and the disclosure of all relevant facts by the assessee. Referring to the Supreme Court decision, the Tribunal clarified that penalties under section 271(1)(c) should apply based on the specific circumstances of each case.In conclusion, the Tribunal dismissed the Revenue's appeal, stating that the penalty was unjustified due to the genuine mistake made by the assessee. The Tribunal differentiated between civil and criminal liabilities, emphasizing that penalties should not be imposed in every case of addition to the returned income. The decision highlighted the importance of assessing each case individually to determine the applicability of penalties under section 271(1)(c) based on the facts and circumstances present.