Tax Tribunal: Penalty voided for inadvertent error; citing case law, penalties not warranted for inadvertent mistakes.

The Tribunal found that the penalty imposed under section 271(1)(c) of the Income Tax Act was unjustified as the appellant's error in claiming depreciation was inadvertent. The appellant promptly rectified the mistake by adding the amount to the total income upon realization. Emphasizing the absence of any misrepresentation and citing relevant case law, the Tribunal concluded that inadvertent errors do not warrant penalties under the Act. Consequently, the penalty was deleted, and the appellant's appeal was allowed.

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Issues:
Penalty under section 271(1)(c) of the Income Tax Act, 1961 for claiming depreciation inadvertently.

Analysis:
The appellant, in this case, appealed against the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961. The Assessing Officer (AO) noticed that the appellant had claimed depreciation inadvertently on a property, which was shown as rental income under the head income from house property. The appellant, upon realization of the error, voluntarily offered to add the amount to the returned income. The AO, however, imposed a penalty of Rs. 2,67,751, which was the minimum imposable penalty. The appellant contended that the error was inadvertent and no penalty should be levied. The Commissioner of Income Tax (Appeals) upheld the penalty.

Upon considering the submissions, the Tribunal found that the mistake was inadvertent as the appellant immediately acknowledged the error and agreed to add the amount to the total income. The property in question was listed as a fixed asset, and depreciation was claimed accordingly. The Tribunal noted that the appellant did not misrepresent any facts during the proceedings. Citing the decision in Price Waterhouse Coopers (P) Ltd. Vs. CIT, the Tribunal emphasized that a bona fide and inadvertent error does not warrant a penalty under section 271(1)(c). The Supreme Court's observation in a similar case highlighted that human errors are common and do not amount to concealing income or furnishing inaccurate particulars.

Based on the above analysis, the Tribunal concluded that the penalty imposed under section 271(1)(c) was unjustified, considering the inadvertent nature of the error. Therefore, the penalty was deleted, and the appellant's appeal was allowed.

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