2008 (3) TMI 317 - HC - Income Tax

Penalty Concealment of Income - assessee made bogus claims of investment allowance and depreciation in respect of machinery which were not purchased, installed or commissioned during the previous year. The assessee has no case that it had in fact purchased and installed the machinery in respect of which benefits were claimed under the statute. On the other hand, the assessee s case is that this is a mistake committed by the auditor and so much so the assessee is not liable to be subjected to penalty. Held that though prepared by the auditor for the assessee, it was for the assessee to ensure that wrong claims are not made by the practitioner or auditor. Penalty imposed u/s 271(1)(c) is valid.

Summary

Issues:
1. Justification of penalty under section 271(1)(c) of the Income-tax Act for the assessment year 1989-90.

Analysis:
The High Court of Kerala, comprising T. R. Ramachandran Nair and C. N. Ramachandran Nair JJ., deliberated on the appeal questioning the Tribunal's decision to uphold the penalty imposed on the assessee under section 271(1)(c) of the Income-tax Act for the assessment year 1989-90. The crux of the matter revolved around the assessee's submission of false claims regarding investment allowance and depreciation for machinery that was neither purchased, installed, nor commissioned during the relevant period. The court noted that the assessee failed to prove the actual acquisition and installation of the machinery for which benefits were sought under the law. The defense put forth by the assessee, attributing the erroneous claims to the auditor's mistake, was deemed insufficient to absolve the assessee from liability. The court emphasized that it was the assessee's responsibility to ensure the accuracy of the claims made on their behalf, even if prepared by a professional.

The court rejected the assessee's plea for immunity from penalty, citing the Supreme Court's decision in T. Ashok Pai v. CIT [2007] 292 ITR 11. The court held that the mere submission of the return by the auditor did not exempt the assessee from verifying the correctness of the claims made. Consequently, the court upheld the minimum penalty imposed under section 271(1)(c) of the Act, emphasizing that there was no basis for reducing the penalty amount. Ultimately, the court dismissed the appeal, affirming the Tribunal's decision and ruling against the assessee.