2000 (12) TMI 233 - AT - Income Tax

Summary

Issues:
Appeal against penalty under section 271(1)(c) of the IT Act, 1961 for assessment year 1987-88.

Analysis:
The appeal challenged the cancellation of the penalty levied by the Assessing Officer (AO) under section 271(1)(c) of the IT Act, 1961 by the Commissioner of Income Tax (Appeals) [CIT(A)]. The appellant contended that the cost of a portion of land was mistakenly included in the cost of a godown building, leading to an unintentional error in claiming depreciation. The appellant argued that this error was a legal mistake, not a deliberate act of furnishing inaccurate particulars. The appellant cited legal precedents to support their position, emphasizing that the error was unintentional and did not amount to deliberate defiance of the law.

The Departmental Representative of Revenue, on the other hand, argued that the appellant, who was an MLA and a Minister of State, made a deliberate wrong claim for depreciation on land to defraud the Revenue. The AO found the claim to be deliberate and not accidental, leading to the imposition of the penalty under section 271(1)(c). The Departmental Representative highlighted that the appellant did not disclose that the depreciation claimed was related to land, further supporting the imposition of the penalty.

Upon considering the arguments and relevant material, the Tribunal referred to legal precedents to determine the criteria for imposing penalties under section 271(1)(c) of the IT Act. The Tribunal emphasized that penalties should not be imposed for technical or venial breaches of the law but require deliberate defiance, contumacious conduct, or conscious disregard of obligations by the party. The Tribunal cited cases where penalties were canceled due to unintentional errors or lack of mens rea, emphasizing the importance of establishing deliberate or fraudulent acts for penalty imposition.

In the present case, the Tribunal noted that the depreciation claim included the cost of land, which was unintentional and not deliberately concealed. The appellant's lack of segregation between land and construction costs, coupled with their acceptance of the error and agreement to disallowance, indicated a bona fide mistake. Considering the appellant's public service commitments and the minor nature of the error, the Tribunal concluded that the penalty imposition was not justified. Therefore, the Tribunal ruled in favor of the appellant, deleting the penalty under section 271(1)(c) of the IT Act.

In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing the unintentional nature of the error, lack of deliberate concealment, and the absence of contumacious conduct or fraudulent intent. The decision highlighted the importance of establishing deliberate defiance of the law for penalty imposition under section 271(1)(c) of the IT Act.