2009 (11) TMI 937 - HC - Income Tax

Summary

Issues involved: Appeal u/s 260 of Income Tax Act, 1961 for assessment year 2003-04 regarding deletion of penalty u/s 271(1)(c) based on incorrect claim of depreciation.

Issue A: Whether the Appellate Tribunal was justified in deleting the penalty u/s 271(1)(c) for inaccurate particulars of income due to incorrect claim of depreciation.

The Commissioner of Income-tax filed an appeal challenging the deletion of penalty imposed under Section 271(1)(c) of the Act. The assessee had claimed depreciation at 20% on a Hotel building instead of the admissible rate of 10%, resulting in disallowance of excess depreciation. The penalty of Rs. 12,47,171 was levied for furnishing inaccurate particulars of income. The Tribunal deleted the penalty, stating that the assessee, being a limited company managed by qualified professionals, relied on the advice of experts for legal and technical matters. The Tribunal found that the assessee acted on the advice of the Chartered Accountant in claiming depreciation, considering the complexity of Income-tax provisions and frequent amendments. It held that the penalty was not justified as the assessee had acted in good faith based on professional advice, citing a similar decision of the High Court.

Issue B: Whether the Tribunal erred in following the decision of the Supreme Court in the case of Dilip N. Shroff regarding penalty imposition.

The Tribunal's decision to delete the penalty was based on the assessee's reliance on the Chartered Accountant's advice for claiming depreciation, considering the changing provisions of the Income-tax Act. The Tribunal found that the assessee's actions were not mala fide and were based on professional guidance, leading to the deletion of the penalty. The Tribunal also referred to a previous decision of the High Court supporting the assessee's position. The High Court upheld the Tribunal's decision, stating that no substantial question of law arose from the Tribunal's order, and dismissed the appeal.

Issue C: Whether the Tribunal's decision to delete the penalty was justified in light of the acts of the assessee's employees/representatives.

The Tribunal considered the complexity of Income-tax provisions and the reliance of the assessee on professional advice in claiming depreciation. It noted that the Chartered Accountant certified the depreciation claim in accordance with the law, and the assessee was bound to rely on such technical expertise. The Tribunal concluded that the penalty imposed by the Assessing Officer was not justified, as the assessee acted in good faith based on professional advice. The High Court agreed with the Tribunal's findings and dismissed the appeal, emphasizing that the penalty was rightly deleted based on the evidence presented.