Taxpayer Wins Appeal: Incorrect Depreciation Claim Does Not Automatically Trigger Penalty Under Section 271(c)

ITAT allowed the appeal, setting aside a penalty under section 271(c) for a disallowed depreciation claim. Following SC precedent in Reliance Petro Products case, the tribunal held that a mere incorrect claim does not automatically warrant penalty. The tribunal emphasized that correct depreciation computation is the Assessing Officer's duty and deleted the penalty amount.

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Issues: Penalty under section 271(c) for claim of depreciation disallowed.

Analysis:
The case involved an appeal against the penalty imposed under section 271(c) amounting to Rs.2,04,545 for a disallowed claim of depreciation on the combined value of land and building. The penalty was levied as the depreciation on the land portion was disallowed and added to the assessee's income. The Assessing Officer upheld the penalty, citing similar circumstances from a previous year. However, the tribunal considered the decision of the Hon'ble Supreme Court in the case of CIT vs Reliance Petro Products (P.) Ltd., where it was held that the denial of a claim does not automatically warrant a penalty. The tribunal emphasized that the correct allowance and computation of depreciation is the Assessing Officer's duty, and a wrong claim by the assessee should not result in a penalty under section 271(1)(c) of the Act. Relying on this precedent, the tribunal concluded that the penalty in this case was not justified and set aside the orders of the lower authorities, thereby deleting the penalty amount.

The tribunal's decision was based on the principle that the denial of a claim does not ipso facto lead to the imposition of a penalty. The tribunal highlighted that the correct computation of depreciation is the Assessing Officer's responsibility, and the assessee correcting a wrong claim should not attract the rigors of penalty under section 271(1)(c) of the Act. By applying the precedent set by the Hon'ble Supreme Court in the Reliance Petro Products (P.) Ltd. case, the tribunal found that the penalty in this case was not warranted. Consequently, the tribunal allowed the appeal of the assessee and pronounced the order in open court on 11th October 2022.

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