Penalty under Section 270A deleted for inadvertent depreciation calculation error in tax audit report

ITAT Delhi upheld CIT(Appeals) decision deleting penalty u/s 270A imposed due to difference between assessed and returned income. The difference arose from inadvertent error where auditors used book value instead of written down value for depreciation calculation in tax audit report. ITAT relied on HC precedent holding bona fide errors cannot justify penalty imposition. Revenue failed to prove assessee's case differently. Appeal decided against revenue, penalty deletion affirmed.

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Issues:
Appeal against deletion of penalty under section 270A of the Income Tax Act, 1961 for assessment year 2017-18.

Detailed Analysis:

1. Facts of the Case:
- The assessee filed its return of income for A.Y. 2017-18 declaring income of Rs. 383,45,50,210.
- Discrepancy of Rs. 1,63,21,921 in opening written down value (WDV) was noticed during assessment proceedings.
- Assessee accepted the mistake and offered excess depreciation claimed for taxation.
- Assessment completed u/s 143(3) assessing total income of Rs. 385,08,72,140.
- Penalty proceedings initiated u/s 271A for underreporting due to misreporting of income.
- Penalty of Rs. 1,13,76,592 levied by AO @ 200% of tax payable.

2. Arguments:
- Assessee's counsel argued that the error was inadvertent, a clerical oversight in adopting the incorrect figure for opening WDV.
- Assessee disclosed the mistake to the AO before assessment proceedings were completed.
- No mala fide intention to underreport income, as advance income-tax was deposited even after the addition.
- AO levied penalty solely on the ground of not filing a revised return u/s 139(4).

3. Decision of CIT(A):
- CIT(A) deleted the penalty, considering it a case of inadvertent mistake with no deliberate underreporting.
- Found the explanation offered by the assessee to be bona fide and all material facts were disclosed.
- CIT(A) disagreed with AO's findings on misreporting of income under section 270A.

4. Legal Precedents Cited:
- Rajasthan High Court and ITAT Mumbai decisions highlighted where penalty was quashed due to lack of clarity on misreporting.
- Delhi High Court decision emphasized that furnishing all transaction details does not constitute misreporting.

5. Conclusion:
- CIT(A) justified in deleting the penalty under section 270A based on the facts and binding precedents.
- No infirmity found in the decision, as a bona fide error cannot be the basis for penalty imposition.
- Appeal of the Revenue dismissed, and the penalty of Rs. 1,13,76,592 directed to be deleted.

This judgment revolves around the inadvertent error made by the assessee in claiming excess depreciation due to a clerical oversight in adopting the incorrect figure for opening WDV. The CIT(A) found the explanation offered by the assessee to be bona fide and concluded that there was no deliberate underreporting of income. The decision was supported by legal precedents emphasizing the need for clarity on misreporting before levying penalties under section 270A. Ultimately, the Revenue's appeal against the deletion of the penalty was dismissed, affirming the CIT(A)'s decision.

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