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2017 (10) TMI 1420 - AT - Income Tax


Issues:
- Appeal against penalty confirmed by CIT(A) for Assessment Year 2011-12.
- Validity of notice issued under section 274 r.w.s. 271 of the Income Tax Act.
- Disallowance of depreciation and penalty under section 271(1)(c) of the Act.

Analysis:
1. The appeal was filed against the penalty of ?5,55,000/- confirmed by the CIT(A) for the Assessment Year 2011-12. The assessee, a company engaged in the business of computer sales and rental income, had declared income from house property but faced disallowance of depreciation by the Assessing Officer (AO). The penalty was levied under section 271(1)(c) of the Act, leading to the appeal challenging its imposition.

2. The main argument presented was regarding the validity of the notice issued under section 274 r.w.s. 271 of the Act, which did not specify the specific limb of section 271(1)(c) - concealment of income or furnishing inaccurate particulars. Citing relevant case laws, the assessee contended that the notice was deficient in specifying the grounds for penalty initiation, making the penalty proceedings invalid.

3. The technical aspect of the case was addressed concerning the disallowance of depreciation and the subsequent penalty under section 271(1)(c) of the Act. The AO disallowed depreciation claimed by the assessee but later, in a revised order, corrected the mistaken identity of the property leading to the deletion of a portion of the disallowance. The Tribunal referenced the decision in CIT vs Reliance Petro Products P. Ltd. [2010] 322 ITR 158 [SC] to assert that the mere disallowance of depreciation in such circumstances does not warrant penalty proceedings under section 271(1)(c) of the Act.

4. Ultimately, the Tribunal allowed the appeal of the assessee, directing the AO to delete the penalty imposed. The decision was based on the invalidity of the notice issued and the lack of justification for penalty imposition due to the corrected disallowance of depreciation. The judgment was pronounced on 10th October 2017, in favor of the assessee.

 

 

 

 

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