2015 (5) TMI 514 - AT - Income Tax

Tax Tribunal: No penalty without intent to evade tax. Bona fide actions. Penalty order set aside.

The Tribunal held that the penalty under Section 271(1)(c) of the Income Tax Act cannot be imposed without evidence of deliberate intention to evade tax. ... Penalty under section 271(1)(c) - wrong claim of the depreciation in respect of fixed assets - Held that:- when the assessee itself reversed its overstated claim of depreciation in the subsequent return, when the mistake of over statement of claim of depreciation was pointed out by the C&AG report, voluntarily and the Assessing Officer raised query subsequent to voluntarily reversed of the said claim then act of conscious and malafidely furnishing of inaccurate particulars of income or concealment of particulars of income cannot be attributed to the assessee public sector undertaking. Therefore, in view of foregoing discussions, we hold that the explanation offered by the assessee was sustainable and bona fide and therefore, penalty u/s 271(1)(c) of the Act is not imposeable on the assessee. Thus AO is directed to delete the impugned penalty levied on the assessee u/s 271(1)(c) of the Act. - Decided in favour of assessee. Issues Involved:1. Legality of the penalty levied under Section 271(1)(c) of the Income Tax Act.2. Assessment of whether the assessee furnished inaccurate particulars of income.3. Determination of the bona fide nature of the assessee's actions regarding the depreciation claim.Issue-wise Detailed Analysis:1. Legality of the Penalty Levied under Section 271(1)(c):The appeal was preferred by the assessee against the order of the Commissioner of Income Tax (Appeals)-IV, New Delhi, which confirmed the penalty order dated 31.01.2013 under Section 271(1)(c) of the Income Tax Act, upholding a penalty of Rs. 50,98,500/-. The main contention of the assessee was that the penalty was bad in law and on facts.2. Assessment of Whether the Assessee Furnished Inaccurate Particulars of Income:The assessee had capitalized a sum of Rs. 20.18 crores under fixed assets for Amritsar Airport and claimed depreciation. The Assessing Officer (AO) found that only Rs. 14.62 crores were completed during the previous year and disallowed depreciation on Rs. 5.56 crores, leading to a disallowance of Rs. 1.5 crores. The AO initiated penalty proceedings, asserting that the assessee furnished inaccurate particulars of income. However, the Tribunal noted that the assessee, a public sector undertaking, had filed its return before the Comptroller & Auditor General (C&AG) made observations. The assessee reversed the depreciation claim in the subsequent year voluntarily, indicating no mala fide intention.3. Determination of the Bona Fide Nature of the Assessee's Actions Regarding the Depreciation Claim:The Tribunal observed that the assessee revised its depreciation claim in the return for AY 2009-10 based on the C&AG's report, which was after the return for AY 2008-09 was filed. The Tribunal found the assessee's actions bona fide, as it reversed the claim voluntarily before the AO raised the issue. The Tribunal relied on various judgments, including those of the Supreme Court and High Courts, emphasizing that mere incorrect claims do not amount to furnishing inaccurate particulars unless there is a deliberate intention to evade tax.Conclusion:The Tribunal concluded that the penalty under Section 271(1)(c) cannot be imposed merely because it is lawful to do so. It must be shown that the assessee concealed particulars of income or furnished inaccurate particulars. The Tribunal held that the assessee's explanation was bona fide and sustainable, and there was no conscious or mala fide furnishing of inaccurate particulars. Consequently, the penalty order and the CIT(A)'s order were set aside, and the AO was directed to delete the penalty.Judgment:The appeal of the assessee was allowed, and the AO was directed to delete the penalty. The decision was pronounced in the open Court on 27th April 2015.