2013 (3) TMI 649 - AT - Income Tax

Penalty u/s 271(1)(c) - wrong claim of depreciation - Held that - The mere mistake in making of a claim in the return of income would not ipso facto reflect concealment or furnishing of inaccurate particulars of income in terms of section 271(1)(c) of the Act. The wrong claim of depreciation in the present case cannot be said to be made with an intention to evade taxes in as much as even after the disallowance of depreciation the resultant income of the assessee remains a loss. - Decided in favour of assessee.

Summary

Issues:
- Appeal against penalty u/s.271(1)(c) of the Income Tax Act, 1961 for A.Y. 2007-08.

Detailed Analysis:
1. Background: The appellant, engaged in manufacturing, filed a return declaring a loss for A.Y. 2007-08. The Assessing Officer disallowed a depreciation claim, leading to a penalty under section 271(1)(c) of the Act.

2. Penalty Upheld: The CIT(A) upheld the penalty levied by the Assessing Officer, prompting the appeal before the Tribunal by the assessee.

3. Assessee's Plea: The assessee contended that the depreciation claim error was unintentional. They argued that the directors, being technical persons, relied on professionals for tax returns, and the mistake was made in good faith without tax evasion intent.

4. Revenue's Position: The Revenue's representative argued that the depreciation claim was incorrect, justifying the penalty imposition.

5. Tribunal's Decision: The Tribunal analyzed the circumstances and found that the incorrect depreciation claim did not indicate tax evasion intent. Despite the disallowed depreciation, the assessee's income remained a loss, and historical losses were highlighted. The Tribunal concluded that the depreciation error was a mistake and not deliberate tax evasion.

6. Judgment: The Tribunal set aside the CIT(A)'s order and directed the Assessing Officer to delete the penalty of &8377; 64,320 imposed under section 271(1)(c) of the Act. Consequently, the appeal of the assessee was allowed.

7. Conclusion: The Tribunal's decision favored the assessee, emphasizing that unintentional errors in tax filings, without intent to evade taxes, should not attract penalties under section 271(1)(c) of the Income Tax Act, 1961.

This detailed analysis highlights the key arguments, positions, and the Tribunal's rationale leading to the judgment in favor of the assessee, emphasizing the absence of deliberate tax evasion intent in the case of the incorrect depreciation claim.