2018 (10) TMI 433 - AT - Income Tax

Penalty imposed u/s 271(1)(c) - details furnished by the assessee in his return are found to be incorrect or erroneous or false - whether assessee voluntarily agreed to surrender the tax on value of depreciation wrongly taken on land and the this mistake was never intentional? - Held that - We find that assessee is a professional and senior lady Gyne Doctor and filed income tax return at ₹ 10,58,44,690/- for assessment year 2010-11. The accounts were audited and Form 3CD was filed by the Chartered Accountant and income tax return were filed on the advice of the Chartered Accountant. The bonafide/inadvertent error on claiming depreciation on composite value of building purchased for medical profession as no bifurcation of land and building was available. On the advice of Chartered Accountant and Auditor, the assessee carried out bifurcation cost of land and cost of building and surrendered excess depreciation claimed at ₹ 10,86,880/- on land with and paid tax thereon. The assessee voluntarily agreed to surrender the tax on value of depreciation wrongly taken on land and the this mistake was never intentional. The assessee has voluntarily bifurcated the value of land and building and surrendered the values of depreciation on land and the act of the assessee under the bonafide belief. Assessee had furnished all the particulars in return filed and never concealed the particulars of income nor submitted false information. We also note that depreciation on full value was allowed in AY 2008-09 u/s. 143(1) and further depreciation was allowed on full value in AY 2009-10 u/s 143(3). As during the assessment proceedings for AY 2010-11 u/s. 143(3) assessee was asked to segregate the value of land and building and accordingly, the assessee segregated the value of land based upon circle rate. The assessee has neither concealed the income nor furnished inaccurate particulars of income and there are no findings of the AO and the CIT (Appeals) that the details furnished by the assessee in his return are found to be incorrect or erroneous or false. Under these circumstances, in our view the penalty in dispute is totally unwarranted and deserve to be deleted. Accordingly, we delete the penalty u/s. 271(1)(c) - Decided in favour of assessee.

Summary

Issues:
1. Penalty imposed under section 271(1)(c) for claiming excess depreciation on land.
2. Justification of penalty imposition by the Assessing Officer and confirmation by the Ld. CIT(A).
3. Assessment of whether there was intentional concealment of income or furnishing of inaccurate particulars by the Assessee.
4. Applicability of relevant case laws in determining the penalty imposition.

Analysis:

1. The appeal was against the penalty imposed under section 271(1)(c) for claiming excess depreciation on land. The Assessee argued that the mistake was inadvertent and bonafide, supported by the fact that excess depreciation was voluntarily surrendered upon identification. The Assessing Officer did not contradict this plea, indicating a genuine error. The Tribunal found the penalty imposition unjustified based on the circumstances.

2. The Assessing Officer and the Ld. CIT(A) justified the penalty imposition by arguing that the Assessee concealed income and furnished inaccurate particulars. The Departmental Representative contended that the Assessee's explanation lacked substantiation and that scrutiny revealed the concealment. However, the Tribunal noted the Assessee's cooperation during assessment proceedings and voluntary surrender of excess depreciation, leading to the conclusion that penalty imposition was unwarranted.

3. The key issue was whether there was intentional concealment of income or furnishing of inaccurate particulars by the Assessee. The Tribunal observed that the Assessee, a professional Gyne Doctor, had audited accounts filed by a Chartered Accountant. The Assessee voluntarily rectified the error upon advice and segregated the value of land and building. Notably, there was no evidence of intentional concealment or submission of false information by the Assessee.

4. Relevant case laws were cited to support the Assessee's position. The Tribunal referred to judgments such as Price Waterhouse Coopers Pvt. Ltd. vs. CIT, Kolkata, Dharmendra Textile Processors, and ITO vs. Silk City Petrofiles Co. Ltd. These cases emphasized inadvertent errors and rectifications made under professional advice as not warranting penalties for concealment of income. The Tribunal, in line with these precedents, concluded that the penalty was unjustified and ordered its deletion.

In conclusion, the Tribunal allowed the appeal, deleting the penalty imposed under section 271(1)(c) of the Income Tax Act. The decision was based on the Assessee's cooperation, voluntary rectification of errors, and absence of intentional concealment or submission of false particulars. The Tribunal's ruling aligned with established case laws emphasizing inadvertent errors rectified in good faith as not warranting penalties for concealment of income.