2014 (12) TMI 517 - AT - Income Tax

Tribunal cancels penalty for excess depreciation claim, citing bona fide error.

M/s. Moti Lal Harivallabh Mishra Versus Income-tax Officer

The tribunal ruled in favor of the assessee, canceling the penalty imposed under section 271(1)(c) of the Income Tax Act. It was held that the excess ... Levy of penalty u/s 271(1)(c) – Excess depreciation on WDV of bus claimed by mistake – No malafide intention - Held that:- Following the decision in Sarv Prakash Kapoor Versus Deputy Commissioner of Income-tax-4(1), Agra [2012 (10) TMI 801 - ITAT, AGRA] - assessee contended that the books have been prepared by the Accountant, who did not understand that depreciation should not be claimed on the asset which was sold during the accounting year - Due to this mistake, excess depreciation was claimed and there was no mala fide intention to claim excess depreciation or to conceal the income or particulars of income - such mistakes are rectifiable during the course of assessment proceedings - Rectifications of such mistakes are not concealment of particulars of income or furnishing of inaccurate particulars of income - The assessee explained that there is a bona fide mistake in calculation - The AO though has invoked explanation-1 to section 271(1)(c) but he did not find that the explanation furnished by the assessee was a false explanation - the assessee has substantiated his explanation by submitting complete facts - the explanation of the assessee was bonafide and under that facts and circumstances, section of 271(1)(c) is not applicable – thus, the AO was not justified in levying penalty u/s 271(1)(c) – relying upon CIT vs. Reliance Petro Product Pvt. Ltd. [2010 (3) TMI 80 - SUPREME COURT] - merely because the assessee claimed deduction of interest expenditure which has not been accepted by the Revenue, penalty u/s 271(1)(c) is not attracted - penalty is discretionary in nature, should not be imposed in each and every case – Decided in favour of assesse. Issues Involved:1. Levy of penalty under section 271(1)(c) of the Income Tax Act.2. Determination of whether the excess depreciation claimed by the assessee constituted concealment of income or furnishing inaccurate particulars of income.Issue-wise Detailed Analysis:1. Levy of Penalty under Section 271(1)(c) of the Income Tax Act:The primary issue in this case was the levy of penalty under section 271(1)(c) of the Income Tax Act, which pertains to the concealment of income or furnishing inaccurate particulars of income. The assessee had claimed excess depreciation of Rs. 47,720 on a bus that was already sold during the financial year. The penalty of Rs. 17,000 was levied by the Assessing Officer (AO) on this basis.The assessee argued that the books were prepared by an accountant who mistakenly claimed depreciation on the sold asset, and there was no mala fide intention to conceal income or furnish inaccurate particulars. The CIT(A) confirmed the penalty, dismissing the appeal of the assessee.2. Determination of Concealment or Inaccurate Particulars:The tribunal considered whether the excess depreciation claimed by the assessee constituted concealment of income or furnishing inaccurate particulars of income. The tribunal noted that the assessee owned multiple buses and made additions to them during the financial year. The excess depreciation was claimed due to the sale of one bus at the end of the financial year, which could be a bona fide error.The tribunal emphasized that the assessee had disclosed complete particulars before the AO, and the mistake was rectifiable, which was indeed rectified by the AO. It was concluded that rectification of such a mistake does not amount to concealment of income or furnishing inaccurate particulars of income.The tribunal referred to several judicial precedents, including the case of Shri Sarv Prakash Kapoor vs. DCIT, where it was held that proceedings under section 271(1)(c) could only be initiated if the AO was satisfied that the assessee had concealed particulars of income or furnished inaccurate particulars. The expressions 'concealed the particulars of income' and 'furnished inaccurate particulars of income' were not defined in the Act, and each case had to be decided based on its facts.The tribunal also referred to the Supreme Court's decisions in Dharmendra Textile Processors and Reliance Petro Products Pvt. Ltd., emphasizing that mere disallowance of a claim does not automatically lead to the levy of penalty unless concealment is established. The tribunal highlighted that a bona fide mistake cannot justify the imposition of penalty.Conclusion:The tribunal concluded that the penalty under section 271(1)(c) should not be imposed in every case, especially when the mistake was bona fide and rectifiable. The authorities below were not justified in levying the penalty against the assessee. Consequently, the tribunal set aside the orders of the authorities below and canceled the penalty.Final Judgment:The appeal of the assessee was allowed, and the penalty was canceled. The order was pronounced in the open court.