2019 (6) TMI 296 - AT - Income Tax

Penalty u/s 271(1)(c) - claim of deprecation on the premises which was let out - HELD THAT - We find that assessee s claim, that assessee was also using the said let out premises as godown has been rejected. This aspect has to be looked from the point of view that the said prices was let out to the assessee s wife itself. Hence the assessee claim that the said prices was also being partly used for godown purposes cannot be said to be ex facie bogus. In our considered opinion assessee s conduct in this regard cannot be said to be contumacious warranting levy of penalty. Levy of penalty on account of tax u/s 115 JB under MAT - assessee s claim was that it was falling under 115 JA. This claim was also supported by the certificate of the auditors. In this view of the matter assessee s conduct cannot be said to be contumacious warranting levy of penalty. If the claim was wrong the responsibility was that of the auditor who duly certified the same. Hence it was a mistake on the part of the auditor and the assessee cannot be visited with penalty for the mistake of its consultant. Assessee need not be visited with the rigours of penal provisions u/s 271(1)(c). We draw support from the larger bench of honourable apex court in the case of Hindustan Steel vs. State of Orissa 1969 (8) TMI 31 - SUPREME COURT wherein it was held that the authorities may not levy the penalty if the conduct of the assessee was not contumacious. - Decided in favour of assessee

Summary

Issues:
1. Sustaining penalty under section 271(1)(c) of the income tax act.
2. Dispute regarding depreciation claim on let-out premises partly used as godown.
3. Dispute on taxation under MAT provisions - section 115JA vs. 115JB.
4. Assessment of contumacious conduct warranting penalty under section 271(1)(c).

The judgment by the Appellate Tribunal ITAT Mumbai involved an appeal against the order of the learned CIT-A regarding the levy of a penalty under section 271(1)(c) of the income tax act for the assessment year 2006-07. The grounds for appeal included the erred sustenance of the penalty amounting to &8377;7,83,991. The first issue leading to the penalty was the dispute over the depreciation claim on premises let out by the assessee, partly used as a godown. The assessing officer rejected the claim, but the CIT-A sustained the appeal. The second issue was the disagreement on the applicability of MAT provisions, specifically whether the assessee fell under section 115JA or 115JB due to its location in a notified Special Economic Zone.

Regarding the claim of depreciation, the Tribunal found that the assessee's assertion of using the let-out premises as a godown, although rejected by the assessing officer, was not patently dubious. Since the premises were let out to the assessee's wife, the claim of partial godown usage was not baseless, leading to the conclusion that the conduct was not contumacious justifying a penalty. Similarly, concerning the MAT provisions, the Tribunal noted that the assessee's claim of falling under section 115JA was supported by the auditor's certificate, shifting the responsibility for any mistake to the auditor. Consequently, the Tribunal held that penalizing the assessee for the auditor's error was unwarranted.

Drawing support from the precedent set by the larger bench of the apex court in Hindustan Steel vs. State of Orissa, where it was established that penalties should not be levied if the assessee's conduct was not contumacious, the Tribunal set aside the lower authorities' orders and annulled the penalty levy under section 271(1)(c). Ultimately, the Tribunal allowed the appeal filed by the assessee, emphasizing that the rigours of penal provisions were not justified in this case.