2006 (12) TMI 67 - HC - Income Tax

Penalty - Assessee claim for depreciation and investment allowance in original return and subsequently withdrawn the claim in revised return and accordingly penalty imposable - Held that penalty not imposable on assessee u/s 271(1)(c)

Summary

Issues:
1. Upholding the decision of the CIT(A) canceling penalty under section 271(1)(c) of the Income Tax Act, 1961.
2. Justification of the Tribunal in accepting the CIT(A)'s decision based on false claims of deduction.
3. Acceptance of the assessee's plea regarding penalty not levied in the earlier year.

Analysis:
Issue 1:
The High Court analyzed whether the Appellate Tribunal was correct in upholding the CIT(A)'s decision to cancel the penalty under section 271(1)(c) of the Income Tax Act. The Tribunal considered various aspects, including the judgments of the Rajasthan and Madras High Courts. It referred to the case law stating that mere non-disclosure or furnishing inaccurate particulars is not enough to attract penalty provisions. The Court emphasized the need for conscious concealment or deliberate furnishing of inaccurate particulars by the assessee to impose a penalty. It highlighted that filing a revised return voluntarily, without prior detection by the Assessing Officer, does not automatically lead to penalty imposition. The Court examined the conduct of the assessee throughout the assessment proceedings and found no evidence of a guilty mind or intention to conceal income particulars. It concluded that the assessee's revised return was filed to avoid potential litigation with the tax department, indicating a prudent approach rather than malafide intent.

Issue 2:
The Court addressed the Tribunal's decision to uphold the CIT(A)'s ruling based on the assessee's habit of making false claims of deduction. It noted that the assessee had claimed depreciation similar to a previous year but voluntarily revised the return, withdrawing the depreciation claim. The Court distinguished between wrongful claims due to bona fide mistakes and intentional concealment for penalty purposes. It concurred with the findings of the CIT(A) and the Tribunal that there was no intention to conceal facts regarding the depreciation claim, leading to a favorable decision for the assessee.

Issue 3:
Regarding the acceptance of the assessee's plea that penalty was not levied in the earlier year on the same issue, the Court found that the assessee's decision to withdraw the depreciation claim in the revised return was a precautionary measure rather than a deliberate attempt to furnish inaccurate particulars. The Court considered the cumulative facts and circumstances, including the dropping of penalty proceedings for previous assessment years, to conclude that the assessee was not liable for penalty under section 271(1)(c) of the Act. Consequently, the Court ruled in favor of the assessee on all questions, disposing of the reference accordingly.