2013 (4) TMI 154 - HC - Income Tax

Penalty u/s.271(1)(c) - Penalty regarding claiming excess depreciation - Held that - The Tribunal recorded excess depreciation originally claimed was on account of bonafide and inadvertent mistake on the part of the assessee. During the course of the assessment proceedings, the assessee realised its mistake and pointed out the same mistake should not be visited with penalty - If the time to file a revised return had expired. In any event, it is not disputed that it was a bonafide mistake on the part of the assessee. Penalty regarding wrongly claiming loss on sale of garment unit as a revenue deduction - Held that - Tribunal records a finding that in the profit and loss account filed along with the return of income, the assessee has clearly described the loss . This loss was added to the net loss in the computation of the total income. Thus, there was complete disclosure - The Tribunal also records that the loss was claimed as a revenue expenditure as the Chartered Accountant did not advice them correctly as to the legal position - The mistake was noticed and corrected by the assessee. The Tribunal concluded the claim for deduction made by the assessee was on account of a bonafide mistake and in such circumstances, the levying of penalty was not justified. Since the decision of the Tribunal is based on finding of fact, we see no reason to entertain above questions - Appeal is dismissed in favour of Assessee.

Summary

Issues:
1. Whether the Tribunal was justified in deleting the penalty for inaccurate particulars of income claimed by the assessee?
2. Whether the Tribunal was justified in deleting the penalty for wrongly claiming loss on sale of garment unit as a revenue deduction?

Analysis:

Issue 1:
The respondent-assessee had claimed excess depreciation of Rs.32.51 lakhs instead of Rs.1.05 crores due to a calculation mistake. The Assessing Officer imposed a penalty under Section 271(1)(c) of the Income Tax Act. The CIT(A) and the Tribunal found the mistake to be inadvertent and bonafide. The Tribunal ruled that the mistake, although should have been rectified by filing a revised return, was not intentional and thus penalty imposition was unwarranted. The Tribunal's decision was based on factual findings, leading to the dismissal of the appeal.

Issue 2:
The respondent-assessee claimed a loss on the sale of a garment manufacturing machine as a revenue deduction but later corrected this mistake during assessment proceedings. The Assessing Officer imposed a penalty under Section 271(1)(c) of the Act. The Tribunal noted that the mistake was due to incorrect advice from the Chartered Accountant and was rectified by the assessee. The Tribunal found the mistake to be bonafide and held that penalty imposition was not justified. The Tribunal also observed that the time for filing a revised return had lapsed and that the revenue did not dispute the bonafide nature of the mistake. Consequently, the appeal was dismissed with no order as to costs.

This judgment highlights the importance of bonafide mistakes and the necessity of rectifying errors during assessment proceedings. The Tribunal's decisions were based on factual findings, emphasizing the need for genuine errors to be distinguished from intentional misstatements when considering penalty imposition under the Income Tax Act.