2011 (5) TMI 895 - HC - Income Tax

Summary

Issues involved: Appeal against penalty under Section 271(1)(c) of the Income Tax Act for wrong claim of depreciation in the return.

Summary:
The appeal was filed by the assessee against the penalty imposed under Section 271(1)(c) of the Income Tax Act for claiming depreciation on a rented house property based on the auditor's report. The Assessing Officer imposed the penalty stating that the mistake was not bona fide. The Commissioner of Income Tax (Appeals) and the Tribunal affirmed the penalty. However, the High Court, after considering the facts, found that the claim of depreciation was made based on the auditor's report and was rectified by filing a revised return after the mistake was detected. The High Court referred to the decision of the Supreme Court in C.I.T. vs. Reliance Petro Products Pvt. Ltd., where it was held that no penalty should be imposed for a wrong claim of depreciation if it was not intentional. The High Court set aside the Tribunal's order and quashed the penalty, allowing the appeal. Additionally, the High Court also allowed the application to quash the initiation of prosecution based on the penalty. No costs were awarded in the case.

In conclusion, the High Court held that the penalty imposed on the assessee for the wrong claim of depreciation was not justified as it was based on the auditor's report and was rectified upon detection of the mistake, in line with the decision of the Supreme Court.