2010 (3) TMI 899 - AT - Income Tax

Penalty under section 271(1)(c) of the Act on account of excess claim of depreciation Held that - Claim of depreciation at 15 per cent. was a clerical error - written down value of building, furniture and fixtures was taken as single block and depreciation was claimed at 15 per cent. as against 10 per cent. allowable as per the Income-tax Rules - During the assessment proceedings, the assessee itself had furnished the revised chart and worked out that the depreciation claimed by it was higher - written down value of building, furniture and fixtures was taken as a single block by mistake and clue to clerical error the depreciation was claimed at 15 per cent., seems plausible penalty canceled in favor of assessee

Summary

Issues:
1. Penalty under section 271(1)(c) of the Act for deletion by the Commissioner of Income-tax (Appeals).

Detailed Analysis:

Issue 1: Penalty under section 271(1)(c) of the Act
The case involved an appeal by the revenue against the order of the Commissioner of Income-tax (Appeals) regarding the deletion of penalty levied under section 271(1)(c) of the Act. The assessee, a company running a cinema theatre, had furnished a return of income declaring a business loss, which was later reduced by the Assessing Officer due to disallowances. The Assessing Officer imposed a penalty under section 271(1)(c) on the disallowed amounts. The Commissioner of Income-tax (Appeals) cancelled the penalty based on the assessee's explanation. The assessee argued that the claim of depreciation at 15% instead of 10% was a clerical error, rectified in subsequent years, and that the deduction under section 35D was for preoperative expenses. The Commissioner found the explanations genuine and held that the penalty was not justified. The Tribunal upheld the Commissioner's decision, noting that the reduction in loss was due to a genuine error in claiming depreciation, and the assessee had no motive to overstate deductions given its substantial losses and previous allowed deductions. The Tribunal also referenced the decision in National Textiles v. CIT [2001] 249 ITR 125, supporting the cancellation of penalty. Therefore, the Tribunal dismissed the revenue's appeal, upholding the cancellation of the penalty under section 271(1)(c) of the Act.

This comprehensive analysis covers the issues, arguments, explanations, and decisions related to the penalty under section 271(1)(c) of the Act in the judgment delivered by the Appellate Tribunal ITAT AHMEDABAD.