TaxTMI 
TaxTMI 
2025 (12) TMI 1873
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....the grounds that the assessee has accepted the disallowance towards captioned claim and disallowing expense would not alter the status of payment of tax as the assessee is exempt u/s 10(23C) of the Act and that there is no "intention" or mens rea on part of the assessee to make an incorrect claim, grievously ignoring: (a) That, "Intention" and/or mens rea cannot be denied since claiming expense (depreciation expense) when no expense has been incurred, in light of admitted reimbursement, is indeed quite blatant that it does not require knowledge of accounts or accounting standards and more so when the assessee has expert assistance of accountants and auditors? (b) That, it does not require knowledge of the Act and accounting standards to avoid claiming expenses, which were not effectively incurred and if a reimbursed expense is claimed in shape of depreciation, then intention behind the same can only be treated as mala fide? (c) That, the Ld. CIT(A) is circumventing the maxim "Lex non cogitadimpossibilia" i.e., "The law does not require the impossible", as in the instant case, it is impossible to treat the intention behind such act of claiming already reim....
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....instant appeal by revenue is condoned taking into account the revenue's solemn averments made in the affidavit to the effect that owning to engagements of AO and his subordinate staff in completing cases of assessments and re-assessments, there occurred delay. We follow the landmark judgement of Hon'ble Apex Court in Collector, Land Acquisition Vs Mst. Katiji and others 1987 AIR 1353, 1987 2 SCC 387 having settled the law long back that all such "technical aspects" must make a way for the cause of "substantial justice". 3. The background facts leading to present appeal are as under: (i) The assessee is a society incorporated by an order of Central Govt. under the MHRD (Ministry of Human Resources & Development) to provide training to technical teachers/faculties. The assessee is funded by Central Govt. through MHRD and the grant-in-aid received is the source of revenue (Para No. 4 of penalty order). For AY 2014-15 under consideration, the assessee filed return of income u/s 139 on 31.03.2015 declaring a loss of Rs. 5,72,14,721/-. The case of assessee was selected under scrutiny and the AO passed assessment-order dated 04.11.2016 u/s 143(3) accepting the loss declared by....
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.... by the decision of the Govt. of India. The assessee had submitted that the income of the assessee society is exempted by the virtue of provisions of section 10(23C)(iiiab) and therefore, entire income of the assessee shall always be exempted. The expenditure on depreciation is only as per the guidelines of MHRD. 7. As per section 43(1), Explanation 10 of the Act, if a portion of the cost of an asset acquired by the assessee has been met directly or indirectly by the Central Govt. or the State Govt, the so much of the cost shall not be included in actual cost to the assessee. Since, the assets of the assessee society were acquired directly or indirectly from utilizing the Central Govt Funds, therefore the actual cost of the assets on which depreciation was claimed was calculated Rs. NIL by the AO. The assessee in its submission claimed that income of the assessee is exempted as per the provisions of section 10(23C)(iiiab) of the Act, although no exemption was claimed in the return of income, the AO disallowed the depreciation as claimed by the assessee amounting to Rs. 5,72,14,721/- and the same added to the total income of the assessee and initiated penalty proceedings u/....
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....eedings were initiated for furnishing inaccurate particulars of income u/s. 271(1)(c) of the Act. Subsequently, by order dated 28.02.2020 the penalty of Rs. 2,00,00,000/ was levied under the said section. Aggrieved by they said levy of penalty, the appellant is in appeal and has raised 5 grounds, which are adjudicated as under: 8. Ground no. 1 to 4 are relating to levy of penalty u/s. 271(1)(c) of the Act of Rs. 2,00,00,000/-. The contention of the appellant in raising these grounds is that the depreciation has been claimed as per the accounting policies consistently followed by the appellant which are as per the guidelines issued by ministry of HRD and audited by C&AG. The report of the C&AG is placed before the Parliament and hence, the appellant cannot furnish inaccurate particulars of its income. 8.1 The appellant further submitted that it is statutorily required to charged depreciation on fixed assets and charging of depreciation or otherwise does not have any impact on its income as the entire income is exempt u/s 10(23C) of the Act. Therefore, there cannot be any deliberate attempt on the part of the appellant to make any wrong claim of expenditure. The app....
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.... competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute" 8.3 Considering the fact in appellant's case in my considered view that there is no intention on the part of the appellant to make an incorrect claim which is evidenced by appellant's subsequent action of accepting the disallowance. Further, the income of the appellant is exempt u/s 10(23C) of the Act and hence, not claiming of /depreciation does not alter the status of payment of tax. The contents of the Tax Audit Report suggest that there is no question of the appellant concealing its income, as there is no benefit of doing so. It appears to me that all that has happened in the present case is that through a bona fide and inadvertent error, the appellant while submitting its return, failed to add the depreciation claimed in Income and Expenditure account to its total income. This can only be described as a human error which anyone is prone to make. This view has been taken by Hon'....
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.... Price Waterhouse (supra). (iii) That the AO has disallowed depreciation claimed in the order of fresh assessment and the assessee has accepted such disallowance by not filing further appeal to CIT(A). Therefore, it is a clear-cut case of furnishing wrong particulars of income and the AO has rightly imposed penalty. 7. Per contra, Ld. AR for assessee/respondent defended the relief granted by CIT(A) and opposed the order of AO with following contentions: (i) That, the assessee is a specialized institution formed under an order of Central Govt. for providing training to technical teachers/faculties. The assessee is under direct control of MHRD. The books of accounts of assessee are prepared as per financial regulations framed by Govt. and such books have been subjected to audit by CAG. That, in terms of accounting regulations framed by Govt., the depreciation on assets was computed and accounted for in books of account. Hence, there is no mistake in claiming depreciation in books of account. The depreciation so accounted for in books of account remained claimed as a deduction in return of income. But the impugned depreciation claimed by assessee resulted only in ....
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....rn of income. The assessee submits that it was an inadvertent claim and not a result of any attempt of assessee to conceal income or furnish inaccurate particulars. In our view, the CIT(A) has applied a judicious approach in accepting this submission of assessee considering the specific facts of assessee and assessee's case. 9. In so far as the reliance placed by Ld. CIT(A) on Price Waterhouse (supra) is concerned, the facts of that case were such that the assessee claimed deduction of gratuity which was disallowable u/s 40A(7). The AO finalized assessment of assessee by way of scrutiny u/s 143(3) and in the assessment so finalized, the assessee's claim remained allowed. Subsequently, the AO re-opened assessee's case u/s 147 and during proceeding of re-assessment disallowed assessee's claim which the assessee accepted. However, the AO imposed penalty u/s 271(1)(c) and on appeal, the Hon'ble Supreme Court exonerated assessee from penalty. The relevant portion of Hon'ble Supreme Court's order is re-produced below: "5. Even though the Statement indicated that the provision towards payment of gratuity was not allowable, the assessee claimed a deduction thereon in its return....
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....ed by the assessee by furnishing inaccurate particulars. The quantum of the penalty was determined at Rs. 27,37,689/-. 12. Feeling aggrieved, the assessee preferred an appeal, but the Commissioner of Income-tax (Appeals) rejected the appeal and upheld the penalty imposed on the assessee. In a further appeal, the Income Tax Appellate Tribunal (for short the Tribunal) upheld the imposition. Significantly, the Tribunal mentions that the assessee had made a mistake, which could be described as a silly mistake, but since the assessee is a high-calibre and competent organisation, it was not expected to make such a mistake. Accordingly, the Tribunal reduced the penalty to 100%. 13. Against the order of the Tribunal, the assessee approached the Calcutta High Court which dismissed its appeal filed under section 260A of the Act by the impugned order. The only reason given by the High Court for dismissing the appeal reads as under: 'After analysing the facts of this case, considering the submissions made by the learned Advocates for the parties and the materials placed before us, we cannot brush aside the fact that the assessee company is a well known a....
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....cy between the Tax Audit Report and the return of income. 17. Having heard learned counsel for the parties, we are of the view that the facts of the case are rather peculiar and somewhat unique. The assessee is undoubtedly a reputed firm and has great expertise available with it. Notwithstanding this, it is possible that even the assessee could make a "silly" mistake and, indeed this has been acknowledged both by the Tribunal as well as by the High Court. 18. The fact that the Tax Audit Report was filed along with the return and that it unequivocally stated that the provision for payment was not allowable under section 40A(7) of the Act indicates that the assessee made a computation error in its return of income. Apart from the fact that the assessee did not notice the error, it was not even noticed even by the Assessing Officer who framed the assessment order. In that sense, even the Assessing Officer seems to have made a mistake in overlooking the contents of the Tax Audit Report. 19. The contents of the Tax Audit Report suggest that there is no question of the assessee concealing its income. There is also no question of the assessee furnishing any inac....