2018 (2) TMI 343 - AT - Income Tax

Penalty u/s 271(1)(c) - willful evasion of tax by claiming deprecation on building - Held that - Penalty u/s 271(1)(c) of the Act cannot be levied and reliance is placed on the decision in the case of Reliance Petroproducts P Ltd 2010 (3) TMI 80 - SUPREME COURT wherein has been held that no penalty u/s 271(1)(c) of the Act could be levied only in mere making a claim which is not sustainable in law by itself. No penalty proceedings were initiated by the Assessing Officer in assessment year 2006-07 and facts of the present case are identical in the impugned assessment year. Moreover, it is a case where no individual is being benefitted by the claiming wrong depreciation. This is a bonafide mistake made by the assessee without any intention to evade tax. Moreover, the assessee has already shown losses for the previous years. The assessee has submitted reasonable explanation on the basis of the report of a qualified auditor. - Decided in favour of assessee

Summary

Issues:
- Appeal against deletion of penalty imposed by the Assessing Officer under section 271(1)(c) of the Income Tax Act on account of willful evasion of tax by claiming depreciation on building.
- Whether penalty under section 271(1)(c) is justified for furnishing inaccurate particulars of income by claiming depreciation on dwelling units of members.

Analysis:
The judgment pertains to two appeals filed by the Revenue against orders of the Commissioner of Income Tax [Appeals] for assessment years 2007-08 and 2008-09. The main issue revolves around the deletion of a penalty imposed under section 271(1)(c) of the Income Tax Act for claiming depreciation on building. The Assessing Officer disallowed the depreciation claim as the return was filed after the due date and held that the cooperative society was not entitled to claim depreciation on dwelling units of members. The penalty was imposed for furnishing inaccurate particulars of income. The assessee contended that they acted on advice from a chartered accountant and the claim was based on the auditor's report. The Commissioner of Income Tax [Appeals] held that the disallowance was a bonafide mistake and not intentional tax evasion, relying on the Supreme Court decision in Reliance Petroproducts Pvt Ltd. The Commissioner noted that no penalty was imposed in the preceding assessment year for a similar disallowance. The Tribunal concurred with the Commissioner's findings and dismissed the Revenue's appeals.

The Tribunal emphasized that the relevant facts regarding the depreciation claim were disclosed in the return of income and were based on the auditor's report. It was observed that the members of the housing society were not technical persons and relied on professional advice. The Tribunal highlighted that the disallowance of depreciation in the preceding assessment year did not attract a penalty. The Tribunal agreed with the Commissioner that the disallowance was a bonafide mistake and not an attempt to evade tax. The Tribunal cited the decision of the Hon'ble Supreme Court in Reliance Petroproducts Pvt Ltd, stating that a penalty cannot be levied for making a claim that is not sustainable in law. The Tribunal concluded that the penalty under section 271(1)(c) was unjustified in the present case, as it was a genuine mistake without any intention to evade tax.

In conclusion, the Tribunal dismissed the Revenue's appeals and directed the Assessing Officer to decide the issue afresh after providing the assessee with a fair opportunity to present their case. The judgment underscores the importance of bonafide mistakes and reliance on professional advice in tax matters, emphasizing that penalties should be imposed only in cases of intentional tax evasion.