Tax Tribunal upholds deletion of penalty under Section 271(1)(c) citing inadvertent error, good faith rectification.

The Tribunal upheld the Commissioner of Income Tax (Appeals)' decision to delete the penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961. The Tribunal found that the assessee's mistake in claiming depreciation on land was inadvertent and rectified in good faith during assessment proceedings, indicating no deliberate intent to conceal income or furnish inaccurate particulars. Additionally, the Tribunal deemed the penalty notice defective for not specifying the exact charge, in line with legal precedents. Consequently, the Revenue's appeal was dismissed, and the penalty deletion was upheld.

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Issues Involved:
1. Whether the Commissioner of Income Tax (Appeals) erred in deleting the penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Deletion of Penalty under Section 271(1)(c):

The Revenue's appeal contested the deletion of a penalty amounting to Rs. 23,68,786/- imposed under Section 271(1)(c) of the Income Tax Act, 1961 by the Assessing Officer (AO). The core issue was whether the assessee had concealed income or furnished inaccurate particulars of income by claiming depreciation on land, which is not permissible under the Act.

Facts and Arguments:

- The assessee filed a return declaring a total income of Rs. 15,55,40,588/-. During scrutiny, the AO observed that the assessee claimed depreciation of Rs. 78,95,954/- on land purchased for Rs. 7,89,59,536/-. Upon confrontation, the assessee admitted the mistake and offered the amount for taxation. Consequently, the AO disallowed the depreciation and imposed a penalty for concealing income or furnishing inaccurate particulars.

- The assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], arguing that the depreciation claim was an inadvertent mistake by the auditor, which was rectified by a letter to the AO. The CIT(A) found the explanation bona fide and deleted the penalty, referencing several judicial decisions, including Price Waterhouse Coopers (P) Ltd. vs. CIT (2012) 348 ITR 306 (SC) and CIT vs. Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR 158 (SC).

Revenue's Arguments:

- The Revenue argued that the AO had properly initiated penalty proceedings and that the satisfaction of concealment or furnishing inaccurate particulars need not be recorded in specific terms. They cited multiple decisions, including the Bangalore ITAT in Jaysons Infrastructure India Private Limited vs. ITO and the Jaipur ITAT in Airen Metals Pvt. Ltd. vs. ACIT, which upheld penalties even when the exact nature of the charge was not specified in the notice.

- The Revenue contended that the assessee was given multiple opportunities to explain during penalty proceedings but failed to respond adequately.

Assessee's Counterarguments:

- The assessee maintained that the mistake was bona fide and rectified voluntarily. They cited the Supreme Court's decision in CIT vs. Reliance Petroproducts Pvt. Ltd., which held that merely making an unsustainable claim does not amount to furnishing inaccurate particulars.

- The assessee also argued that the penalty notice under Section 274 did not specify the exact charge, making it legally insufficient per the Karnataka High Court's decision in CIT vs. Manjunatha Cotton and Ginning Factory, affirmed by the Supreme Court.

Tribunal's Findings:

- The Tribunal noted that the assessee admitted the mistake and rectified it during assessment proceedings, indicating no mala fide intent. They referenced the Supreme Court's decision in Price Waterhouse Coopers (P) Ltd. vs. CIT, which held that inadvertent errors do not warrant penalties under Section 271(1)(c).

- The Tribunal also found the penalty notice defective for not specifying whether the charge was for concealment of income or furnishing inaccurate particulars, aligning with the Karnataka High Court's decision in CIT vs. Manjunatha Cotton and Ginning Factory.

Conclusion:

The Tribunal upheld the CIT(A)'s decision to delete the penalty, concluding that the assessee's mistake was bona fide and the penalty notice was legally insufficient. The Revenue's appeal was dismissed.

Order:

The appeal by the Revenue stands dismissed.

Pronouncement:

Order pronounced in the open court on 02/02/2018.

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