2011 (3) TMI 1598 - AT - Income Tax

Summary

Issues involved:
The judgment involves challenges to penalty levied under section 271(1)(c) of the Income Tax Act, 1961 in relation to disallowance of expenses and depreciation claimed by the assessee.

Disallowance under section 40(a)(ia):
The Assessing Officer disallowed &8377; 1,05,50,000 for non-payment of deducted tax to the Central Government on time, invoking section 40(a)(ia). The assessee argued that the disallowance was due to a technical lapse and the expenses were allowed irrespective of TDS payment timing. They contended that once an expense is allowed, it cannot be penalized, as the disallowance is of a relative nature. The CIT (A) deleted the penalty, noting that the claim was shifted in time due to deeming provisions, and the assessee did not intend to evade tax. The Tribunal upheld this decision based on a retrospective amendment and lack of tax evasion intention.

Higher claim of depreciation:
The AO disallowed &8377; 46,63,818 for excess depreciation claimed by the assessee, attributing it to a technical error. The assessee explained that the error arose from using outdated depreciation rates, which went unnoticed by auditors. The CIT (A) upheld the penalty, stating that the higher claim was deliberate. However, the Tribunal disagreed, citing a Supreme Court judgment that unintentional errors do not constitute inaccurate particulars. They found the claim to be a technical mistake and not a deliberate act, thus no penalty was justified under section 271(1)(c).

Conclusion:
The Tribunal dismissed the revenue's appeal and allowed the assessee's appeal, finding no grounds for penalty under section 271(1)(c) for either the disallowance under section 40(a)(ia) or the higher depreciation claim. The cross objection filed by the assessee was deemed infructuous and dismissed accordingly.